The effect of demand uncertainty in a price-setting newsvendor model

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• 作者：Minghui Xu ; Youhua (Frank) Chen ; Xiaolin Xu
• 关键词：Newsvendor ; Pricing ; Demand uncertainty ; Stochastic comparison
• 刊名：European Journal of Operational Research
• 出版年：2010
• 出版时间：1 December 2010
• 年：2010
• 卷：207
• 期：2
• 页码：946-957
• 全文大小：323 K

文摘

We study the effects of demand uncertainty on optimal decisions and the expected profit of a price-setting newsvendor who faces either additive or multiplicative stochastic demand. Our key findings are as follows. (1) A stochastically larger demand may even lead to a smaller order size and a lower profit when price is endogenous. (2) A stochastically larger demand will lead to a higher selling price in general for the additive demand case but to a lower selling price under certain mild conditions for the multiplicative demand case. Moreover, if the larger demand can be represented by a transformation of the lower one, it will lead to a higher expected profit for both demand cases. However, except for the setting with a zero shortage cost, a larger demand may not necessarily result in a higher expected profit in general. (3) Under mild conditions, a less variable demand will lead to a higher and lower selling price for the additive and multiplicative demand case, respectively, and a higher expected profit for both cases.