A newsvendor model with service and loss constraints

Werner Jammernegg () and Peter Kischka ()
Additional contact information
Werner Jammernegg: Vienna University of Economics and Business, Institute of Production Management
Peter Kischka: Friedrich Schiller University Jena, Department of Business Statistics

No 21/2008, Jena Research Papers in Business and Economics - Working and Discussion Papers (Expired!) from Friedrich Schiller University Jena, School of Economics and Business Administration

Abstract: Actual performance measurement systems do not only consider financial measures like costs and profits but also non-financial indicators with respect customer service, quality and flexibility. Using the newsvendor model we explore the influence of possibly conflicting performance measures on important operations decisions like the order quantity and the selling price of a product. For price-independent as well as price-dependent demand distribution like in the classical newsvendor model the objective is to maximise the expected profit. But the optimal decisions are computed with respect to a service constraint - a lower bound for the level of product availability - and to a loss constraint - an upper bound for the probability of resulting in loss. For the price-independent model a condition for the existence of an optimal order quantity and its structure is presented. For the price-setting newsvendor the admissible region of the order quantity and the selling price is characterised for the additive and the multiplicative model. Furthermore, it is shown that higher variability of demand leads to a smaller admissible region of the decision variables thereby easing the computation of the optimal decisions.

Keywords: Constrained Newsvendor Model; Price-Setting Newsvendor (search for similar items in EconPapers)
JEL-codes: C44 M11 (search for similar items in EconPapers)
Date: 2008-12-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://oweb.b67.uni-jena.de/Papers/wp-jbe200821.pdf (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:jen:jenjbe:2008-21

Access Statistics for this paper

More papers in Jena Research Papers in Business and Economics - Working and Discussion Papers (Expired!) from Friedrich Schiller University Jena, School of Economics and Business Administration
Bibliographic data for series maintained by Markus Pasche ().