# Newsvendor Problem

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Slide 1

﻿Newsvendor Problem must choose what number of daily papers to purchase before you know the day's request q = #of daily papers to purchase b = commitment per daily paper sold c = misfortune per unsold daily paper arbitrary variable D request

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Previously Optimization Probability Review pdf, cdf, E, Var Poisson, Geometric, Normal, Binomial, …

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Agenda Final Quiz Inventory (Ch 12)

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Final Survey acceptable preferred in class 1 0 Fri twelve Sat 9 4 Fri 4pm - Sat 11 4 Sat twelve Sun 7 1 Sat 4pm-Sun 5 1 Sun twelve Mon 4 1 Sun 4pm-Mon 4 1 Mon 11am-Tue 2 2

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Quiz normal 88% "Compose it in scientific documentation"

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Inventory Models Capacity administration: overbooking, affirmations, … Batching, arrange amount, altered costs Probability + straightforward advancement

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Newsvendor Problem must choose what number of daily papers to purchase before you know the day's request q = #of daily papers to purchase b = commitment per daily paper sold c = misfortune per unsold daily paper irregular variable D request

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Newsvendor Problem income = b · #sold - c · #unsold #sold = min(D,q), #unsold = max(q-D,0) income Y(q,D) = b·min(D,q) - c·max(q-D,0) max E[Y(q,D)] s.t. q≥0 information we require: b, c, conveyance of D

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Newsvendor Problem max E[Y(q,D)] s.t. q≥0 1 choice variable: attempt all unique q systematic arrangement

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Analytical Solution P(D ≤ q*) = b/(b+c) round up if q* whole number