Extended distribution‐free newsvendor models with demand updates using experts’ judgment

Nagare, Madhukar; Dutta, Pankaj; Cheikhrouhou, Naoufel

doi:10.1111/itor.12700

Cited by 4 publications

(6 citation statements)

References 75 publications

(124 reference statements)

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“…Buhayenko and Hertog (2017) develop an affinely adjustable robust model to study the problem of multiperiod supply chain coordination with the help of a temporary time-based discount under demand uncertainty. Nagare et al (2021) consider a distributionally robust newsvendor problem with demand updates using experts' judgment. The above studies all extend the classical robust newsvendor model from a different perspective.…”

Section: Literature Reviewmentioning

confidence: 99%

Newsvendor model with voucher sales: a distributionally robust approach

Zhong

Jiang

Zhang

et al. 2023

Int Trans Operational Res

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Vouchers as a popular short‐term marketing tool are widely used by many firms, through which retailers can lock in customers and obtain working capital in advance. Consumers can use the voucher to reduce the product purchase price to an equal face value or purchase the product at a discount. We apply the classical newsvendor model to study the merits of vouchers for the retailer's ordering decision in the face of uncertainties in both the market demand and voucher redemption rate. We propose a distributionally robust approach to solve this newsvendor problem. The approach only requires the first and second moments of the demand and redemption rate distributions and yields a lower bound on the expected profit. Specifically, we derive the optimal ordering decision in closed form and obtain the optimal expected profit based on the limited distribution information. We find that a higher redemption rate does not necessarily increase the retailer's profit and the voucher quantity, but always increases the retailer's order quantity. Interestingly, we show that when the buyback price of the voucher is relatively high, increasing the voucher redemption rate is more profitable for the retailer. In addition, the retailer's profit, and the quantities of the product and the voucher decrease with the buyback price of the voucher.

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Section: Literature Reviewmentioning

confidence: 99%

Newsvendor model with voucher sales: a distributionally robust approach

Zhong

Jiang

Zhang

et al. 2023

Int Trans Operational Res

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“…Zhang et al [24] provided insight into information asymmetry, information sharing, and credit transaction contracts in the second-stage supply chain under customer balking. Nagare et al [25] used expert judgment to mathematically aggregate demand forecast adjustments, thereby considering the updated forecast. Thus, constraints for order size and maintenance of a predefined service level α were set for practical use.…”

Section: Literature Reviewmentioning

confidence: 99%

Service Level Constrained Distribution-Free Newsvendor Problem with Balking Penalty

Lee

Cheong

2022

Mathematics

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This study extends the newsvendor model to address customer balking and its penalty under service-level constraints. The model designed in this study determines the optimal order quantity to derive the maximum expected profit when a customer is reluctant to buy a product and the available inventory falls below a certain threshold. In addition, the service level is introduced into the procedure to determine the optimal order quantity, thus facilitating the process. Under these circumstances, we also propose a corresponding distribution-free model to determine tight lower bounds on expected profits under the worst-case scenario. To quantitatively evaluate our model’s performance, we compared profits based on the presence or absence of demand distribution, and demonstrated the effect of varying balking penalty costs and probabilities. Introducing a practical service level that can be used as a trade-off tool to help determine reasonable estimates and profitable decisions is beneficial when determining order quantity by comparing goodwill and holding costs.

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“…Sarkar et al (2018) developed a newsvendor optimization model considering a consignment policy and royalty reduction of the retailer. Nagare et al (2019) constructed a newsvendor model with demand updates using expert judgment. Raza and Rathinam (2017) constructed a model for joint price differentiation and inventory decision for a risk-adjusted firm facing demand leakage.…”

Section: Literature Reviewmentioning

confidence: 99%

“…(2018) developed a newsvendor optimization model considering a consignment policy and royalty reduction of the retailer. Nagare et al. (2019) constructed a newsvendor model with demand updates using expert judgment.…”

Section: Literature Reviewmentioning

confidence: 99%

Joint pricing and ordering decisions for a loss-averse retailer with quantity-oriented reference point effect and demand uncertainty: a distribution-free approach

Qiu

Sun

2021

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PurposeThis work examines the joint pricing and ordering (JPO) decisions for a loss-averse retailer with quantity-oriented reference point (RP) effect under demand uncertainty.Design/methodology/approachThe demand is assumed to be uncertain with the mean and variance as the only known information. The prospect theory is used to model the retailer's expected utility. An expected utility maximization model in the distribution-free approach (DFA) is then developed. Using duality theory, the expected utility under the worst-case distribution is transformed into tractable piece-wise functions. To examine the effectiveness of the DFA in coping with the demand uncertainty, a stochastic programming model is developed and its solutions are used as benchmarks.FindingsThe proposed model and solution approach can effectively hedge against the demand uncertainty. The JPO decisions are significantly influenced by the LA coefficient and the reference level. The LA has a stronger influence than the reference level does on the expected utility. An excessive LA is detrimental while an appropriate reference level is beneficial to the retailer.Practical implicationsThe results of this work are applicable to loss-averse retailers with the quantity-oriented RP when making JPO decisions with difficulty in predicting the demands.Originality/valueThe demand is assumed to be uncertain in this work, but a certain demand distribution is usually assumed in the existing literature. The DFA is used to study JPO decisions for the loss-averse retailer with quantity-oriented RP effect under the uncertain demand.

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Extended distribution‐free newsvendor models with demand updates using experts’ judgment

Cited by 4 publications

References 75 publications

Newsvendor model with voucher sales: a distributionally robust approach

Newsvendor model with voucher sales: a distributionally robust approach

Service Level Constrained Distribution-Free Newsvendor Problem with Balking Penalty

Joint pricing and ordering decisions for a loss-averse retailer with quantity-oriented reference point effect and demand uncertainty: a distribution-free approach

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