On the effect of demand randomness on inventory, pricing and profit

On the effect of demand randomness on inventory, pricing and profit

We consider a stocking-factor-elasticity approach for pricing newsvendor facing multiplicative demand uncertainty with lost sales. For a class of iso-elastic demand curves, we prove that optimal order quantity decreases in demand uncertainty for zero salvage value. This contrasts with fixed-price ne...

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Main Authors: Chua, Geoffrey Bryan Ang, Liu, Yan
Other Authors: Nanyang Business School
Format: Article
Language:English
Published: 2015
Subjects:
DRNTU::Business::Operations management
Demand Randomness
Pricing Newsvendor
Online Access:https://hdl.handle.net/10356/79324
http://hdl.handle.net/10220/38534
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Institution: Nanyang Technological University
Language: English
id sg-ntu-dr.10356-79324
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spelling sg-ntu-dr.10356-793242023-05-19T06:44:43Z On the effect of demand randomness on inventory, pricing and profit Chua, Geoffrey Bryan Ang Liu, Yan Nanyang Business School DRNTU::Business::Operations management Demand Randomness Pricing Newsvendor We consider a stocking-factor-elasticity approach for pricing newsvendor facing multiplicative demand uncertainty with lost sales. For a class of iso-elastic demand curves, we prove that optimal order quantity decreases in demand uncertainty for zero salvage value. This contrasts with fixed-price newsvendor results which depend on the critical ratio. Numerical tests show that optimal order quantity increases in demand uncertainty for high salvage value, low marginal cost, and low price-elasticity. We also report results on optimal price, service level, and profit. Accepted version 2015-08-27T08:37:42Z 2019-12-06T13:22:34Z 2015-08-27T08:37:42Z 2019-12-06T13:22:34Z 2015 2015 Journal Article Chua, G. B. A., & Liu, Y. (2015). On the effect of demand randomness on inventory, pricing and profit. Operations Research Letters, 43(5), 514-518. doi:10.1016/j.orl.2015.07.007 0167-6377 https://hdl.handle.net/10356/79324 http://hdl.handle.net/10220/38534 10.1016/j.orl.2015.07.007 en Operations research letters © 2015 Elsevier B.V. This is the author created version of a work that has been peer reviewed and accepted for publication by Operations Research Letters, Elsevier B.V. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [http://dx.doi.org/10.1016/j.orl.2015.07.007]. application/pdf
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic DRNTU::Business::Operations management
Demand Randomness
Pricing Newsvendor
spellingShingle DRNTU::Business::Operations management
Demand Randomness
Pricing Newsvendor
Chua, Geoffrey Bryan Ang
Liu, Yan
On the effect of demand randomness on inventory, pricing and profit
description We consider a stocking-factor-elasticity approach for pricing newsvendor facing multiplicative demand uncertainty with lost sales. For a class of iso-elastic demand curves, we prove that optimal order quantity decreases in demand uncertainty for zero salvage value. This contrasts with fixed-price newsvendor results which depend on the critical ratio. Numerical tests show that optimal order quantity increases in demand uncertainty for high salvage value, low marginal cost, and low price-elasticity. We also report results on optimal price, service level, and profit.
author2 Nanyang Business School
author_facet Nanyang Business School
Chua, Geoffrey Bryan Ang
Liu, Yan
format Article
author Chua, Geoffrey Bryan Ang
Liu, Yan
author_sort Chua, Geoffrey Bryan Ang
title On the effect of demand randomness on inventory, pricing and profit
title_short On the effect of demand randomness on inventory, pricing and profit
title_full On the effect of demand randomness on inventory, pricing and profit
title_fullStr On the effect of demand randomness on inventory, pricing and profit
title_full_unstemmed On the effect of demand randomness on inventory, pricing and profit
title_sort on the effect of demand randomness on inventory, pricing and profit
publishDate 2015
url https://hdl.handle.net/10356/79324
http://hdl.handle.net/10220/38534
_version_ 1770564308105691136

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