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

Charles X. Wang, Scott Webster, Sidong Zhang

Research output: Contribution to journalArticle

6 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 languageEnglish (US)
Pages (from-to)100-112
Number of pages13
JournalInternational Journal of Production Economics
Volume154
DOIs
StatePublished - Aug 2014

Keywords

  • Inventory
  • Newsvendor model
  • Pricing
  • Robust optimization

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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