A distribution-free newsvendor problem with nonlinear holding cost

Brojeswar Pal, Shib Sankar Sana and Kripasindhu Chaudhuri

International Journal of Systems Science, 2015, vol. 46, issue 7, 1269-1277

Abstract: In this paper, we analyse a single-period newsvendor model to determine the optimal order quantity where the customers’ balking occurs.This scenario occurs when the customers are opposed to buy a product for various reasons, such as decreasing quality of product, product is not as good as fresh when it reaches under a threshold level, etc. The model is investigated by assuming that the holding cost function depends on order quantity and the inventory level at which customer balking occurs depends on holding cost. The model allows partial backlogging and permits part of the backlogged shortages to turn into lost sales. We develop the model without taking any specific distributional form of demand, only assuming the mean and the variance of the distribution of demand. Finally, we illustrate the model by numerical examples and compare our distribution-free model with the specific distributional form of demand.

Date: 2015
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Citations: View citations in EconPapers (6)

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DOI: 10.1080/00207721.2013.815828

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