The Multiproduct Newsvendor Problem with Customer Choice

Amr Farahat () and Joonkyum Lee ()
Additional contact information
Amr Farahat: Olin Business School, Washington University, St. Louis, Missouri 63130
Joonkyum Lee: Sogang Business School, Sogang University, Seoul 04107, South Korea

Operations Research, 2018, vol. 66, issue 1, 123-136

Abstract: We address the multiproduct newsvendor problem under a general specification of customer choice behavior. We develop a methodology that yields upper bounds on the optimal value as well as feasible inventory solutions. The methodology is based on an approximate Jordan decomposition of the state transition matrix. Two specializations of the methodology are presented: one leads to a decomposition by customer into a sequence of assortment optimization problems and the second leads to a decomposition by product into a collection of independent newsvendor problems. We conduct computational experiments and find that the proposed methodology outperforms existing bounds. The electronic companion is available at https://doi.org/10.1287/opre.2017.1654 .

Keywords: dynamic; stockout-based; substitution; •; approximate; similarity; transformation (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.1287/opre.2017.1654 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:66:y:2018:i:1:p:123-136

Access Statistics for this article

More articles in Operations Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().