Expected Value of Distribution Information for the Newsvendor Problem

Jinfeng Yue (), Bintong Chen () and Min-Chiang Wang ()
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Jinfeng Yue: Department of Management and Marketing, Jennings A. Jones College of Business, Middle Tennessee State University, Murfreesboro, Tennessee 37132
Bintong Chen: Department of Management and Operations, College of Business and Economics, Washington State University, Pullman, Washington 99164-4736
Min-Chiang Wang: Department of Management and Operations, College of Business and Economics, Washington State University, Pullman, Washington 99164-4736

Operations Research, 2006, vol. 54, issue 6, 1128-1136

Abstract: This paper extends previous work on the distribution-free newsvendor problem, where only partial information about the demand distribution is available. More specifically, the analysis assumes that the demand distribution f belongs to a class of probability distribution functions (pdf) (F-script) with mean (mu) and standard deviation (sigma). While previous work has examined the expected value of distribution information (EVDI) for a particular order quantity and a particular pdf f , this paper aims at computing the maximum EVDI over all f (in) (F-script) for any order quantity. In addition, an optimization procedure is provided to calculate the order quantity that minimizes the maximum EVDI.

Keywords: inventory/production: perishable/aging items; inventory/production: uncertainty; decision analysis: applications (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (53)

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