 A dynamic newsvendor problem with goodwill-dependent demands and minimum commitmentXiaoya Han, Yugang Yu and Guiping Hu Omega, 2019, vol. 89, issue C, 242-256 Abstract: A retailer provides products to satisfy consumers whose goodwill towards the retailer is positively correlated to the past fulfillment levels of the retailer. Consumer goodwill changes with fulfillment levels and influences the demand. The retailer makes a commitment on order quantity to suppliers who offer price discounts. This paper focuses on the decision-making problem faced by the retailer to determine the minimum commitment at the beginning of the planning horizon and ordering policies in the long run. The objective is the retailer's profit maximization. We model the problem as a stochastic dynamic programming model and solve the model with a robust optimization approach considering consumers’ goodwill. We find that all goodwill paths monotonically converge to a constant steady-state goodwill characterized by implicit equations. Moreover, if the retailer ignores long-term implications of its ordering policy, it may lose profits. In addition, the steady-state goodwill may decrease even with increased committed minimum quantity. Keywords: Dynamic newsvendor; Stochastic programming; Goodwill-dependent demands; Minimum commitment; Robust optimization (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jomega:v:89:y:2019:i:c:p:242-256 Ordering information: This journal article can be ordered from DOI: 10.1016/j.omega.2018.10.012 Access Statistics for this article Omega is currently edited by B. Lev More articles in Omega from Elsevier |
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