Price sensitive demand with random sales price – a newsboy problem

Shib Sankar Sana

International Journal of Systems Science, 2011, vol. 43, issue 3, 491-498

Abstract: Up to now, many newsboy problems have been considered in the stochastic inventory literature. Some assume that stochastic demand is independent of selling price (p) and others consider the demand as a function of stochastic shock factor and deterministic sales price. This article introduces a price-dependent demand with stochastic selling price into the classical Newsboy problem. The proposed model analyses the expected average profit for a general distribution function of p and obtains an optimal order size. Finally, the model is discussed for various appropriate distribution functions of p and illustrated with numerical examples.

Date: 2011
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DOI: 10.1080/00207721.2010.517856

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