DocumentCode :
843084
Title :
Mean–Variance Analysis for the Newsvendor Problem
Author :
Choi, Tsan-Ming ; Li, Duan ; Yan, Houmin
Author_Institution :
Inst. of Textiles & Clothing, Hong Kong Polytech. Univ., Hong Kong
Volume :
38
Issue :
5
fYear :
2008
Firstpage :
1169
Lastpage :
1180
Abstract :
The newsvendor problem is a fundamental building block for inventory management with a stochastic demand. The classical newsvendor problem focuses on a sole objective of either minimizing the expected cost or maximizing the expected profit. However, the performance measure with expected value alone is insufficient, and it ignores the risk preferences of the decision makers. As a result, we carry out a mean-variance analysis of the newsvendor problem. We construct analytical models and reveal the problem´s structural properties. We propose the solution schemes which help to identify the optimal solutions. Interesting findings regarding the efficient frontier, the case with a stockout penalty cost, and the safety-first objective are discussed.
Keywords :
cost reduction; decision making; decision theory; inventory management; profitability; risk analysis; stochastic processes; decision maker risk preferences; inventory management; mean-variance analysis; newsvendor problem; profitability; safety-first objective; stochastic demand; stockout penalty cost; Analytical models; Closed-form solution; Cost function; Inventory control; Inventory management; Operations research; Pricing; Risk analysis; Stochastic processes; Supply chains; Inventory; mean–variance (MV) analysis; newsvendor problem; risk; risk attitude;
fLanguage :
English
Journal_Title :
Systems, Man and Cybernetics, Part A: Systems and Humans, IEEE Transactions on
Publisher :
ieee
ISSN :
1083-4427
Type :
jour
DOI :
10.1109/TSMCA.2008.2001057
Filename :
4604824
Link To Document :
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