A Portfolio Approach to Multi-product Newsvendor Problem with Budget Constraint

Bin Zhang () and Zhongsheng Hua ()
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Bin Zhang: Sun Yat-Sen University
Zhongsheng Hua: University of Science and Technology of China

Chapter Chapter 16 in Handbook of Newsvendor Problems, 2012, pp 361-381 from Springer

Abstract: Abstract This chapter investigates a portfolio approach to multi-product newsvendor problem with budget constraint, in which the procurement strategy for each newsvendor product is designed as portfolio contract. A portfolio contract consists of a fixed-price contract and an option contract. We model the problem as an expected profit-maximization model, and propose an efficient solution procedure after investigating the structural properties of the model. We conduct numerical studies to show the efficiency of the proposed solution procedure, and to compare three models with different procurement contracts, i.e., fixed-price contract, option contract, and portfolio contract. Numerical results are shown to demonstrate the advantage of the portfolio model, and sensitivity analysis is provided for obtaining some managerial insights.

Keywords: Newsvendor; Option contract; Portfolio; Budget constraint; Multiple products (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-1-4614-3600-3_16

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DOI: 10.1007/978-1-4614-3600-3_16

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