Robust price-setting newsvendor model with interval market size and consumer willingness-to-pay

Charles X. Wang; Scott Webster; Sidong Zhang

doi:10.1016/j.ijpe.2014.04.006

Robust price-setting newsvendor model with interval market size and consumer willingness-to-pay

Charles X. Wang, Scott Webster, Sidong Zhang

Supply Chain Management

Research output: Contribution to journal › Article › peer-review

20 Scopus citations

Abstract

We consider a price-setting newsvendor problem with partial information. The newsvendor does not know the price-dependent probability distribution of demand, but is able to estimate lower and upper limits of the market size and consumer willingness-to-pay. The objective is to minimize the maximum loss in expected profit, or minimax regret. We derive closed-form expressions for optimal quantity and price and identify managerial insights.

Original language	English (US)
Pages (from-to)	100-112
Number of pages	13
Journal	International Journal of Production Economics
Volume	154
DOIs	https://doi.org/10.1016/j.ijpe.2014.04.006
State	Published - Aug 2014

Keywords

Inventory
Newsvendor model
Pricing
Robust optimization

ASJC Scopus subject areas

General Business, Management and Accounting
Economics and Econometrics
Management Science and Operations Research
Industrial and Manufacturing Engineering

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10.1016/j.ijpe.2014.04.006

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abstract = "We consider a price-setting newsvendor problem with partial information. The newsvendor does not know the price-dependent probability distribution of demand, but is able to estimate lower and upper limits of the market size and consumer willingness-to-pay. The objective is to minimize the maximum loss in expected profit, or minimax regret. We derive closed-form expressions for optimal quantity and price and identify managerial insights.",

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author = "Wang, {Charles X.} and Scott Webster and Sidong Zhang",

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AU - Webster, Scott

AU - Zhang, Sidong

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N2 - We consider a price-setting newsvendor problem with partial information. The newsvendor does not know the price-dependent probability distribution of demand, but is able to estimate lower and upper limits of the market size and consumer willingness-to-pay. The objective is to minimize the maximum loss in expected profit, or minimax regret. We derive closed-form expressions for optimal quantity and price and identify managerial insights.

AB - We consider a price-setting newsvendor problem with partial information. The newsvendor does not know the price-dependent probability distribution of demand, but is able to estimate lower and upper limits of the market size and consumer willingness-to-pay. The objective is to minimize the maximum loss in expected profit, or minimax regret. We derive closed-form expressions for optimal quantity and price and identify managerial insights.

KW - Inventory

KW - Newsvendor model

KW - Pricing

KW - Robust optimization

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JO - International Journal of Production Economics

JF - International Journal of Production Economics

ER -

Robust price-setting newsvendor model with interval market size and consumer willingness-to-pay

Abstract

Keywords

ASJC Scopus subject areas

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