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

• 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
• Institution: Nanyang Technological University

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...