Payoff Matrices Pay Off at Hallmark

F. Hutton Barron
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F. Hutton Barron: Department of Management Science and Statistics, The University of Alabama, P.O. Box I, University, Alabama 35486

Interfaces, 1985, vol. 15, issue 4, 20-25

Abstract: The “newsboy” model, expressed as a payoff matrix, enables inventory control managers to incorporate three important contingencies---demand uncertainty, salvage value, and shortage cost---in determining run size or purchase quantity. To use this model, managers had to learn to provide subjective probability distributions of demand as well as model formulation, model solution, and sensitivity analysis. Parallel analyses (business as usual versus the model) demonstrated higher profits for model-based decisions. In several product areas, model-based decisions are now business as usual.

Keywords: decision; analysis:; applications (search for similar items in EconPapers)
Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:inm:orinte:v:15:y:1985:i:4:p:20-25

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