Price-setting newsvendor with strategic consumers

Taofeng Ye and Hao Sun

Omega, 2016, vol. 63, issue C, 103-110

Abstract: We consider a newsvendor who sells a single product over a single season with the objective of determining both the selling price and stock quantity to maximize the expected profit. The customers are strategic and we consider two demand cases: additive and multiplicative. For each case, we derive the newsvendor׳s optimal decisions and demonstrate that neglecting the price-sensitivity of demand leads the newsvendor to make sub-optimal decisions. Moreover, we show that under certain conditions, strategic consumer behavior may positively affect the newsvendor׳s optimal expected profit in the additive demand case.

Keywords: Newsvendor; Price-setting; Strategic consumer behavior; Additive demand; Multiplicative demand (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (17)

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DOI: 10.1016/j.omega.2015.10.006

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