Journal article
Improved profit functions for newsvendor models with normally distributed demand
International journal of procurement management, Vol.4(1), pp.20-36
01/01/2011
Handle:
https://hdl.handle.net/2376/105466
Abstract
Existing textbook and research paper formulas for newsvendor models with normally distributed demand represent reasonable approximations of expected profit only when the coefficient of variation (CV) of demand is relatively low. Instead, we seek expected profit functions that better represent the expected value of what firms will actually earn if managers are making ordering decisions assuming a normal distribution (the most common assumption in many textbooks and papers). We derive robust expected profit formulas that account for high CV, and computational experiments suggest that our formulas provide a close match to actual realised average profit, irrespective of the CV level.
Metrics
11 Record Views
Details
- Title
- Improved profit functions for newsvendor models with normally distributed demand
- Creators
- Jianli Hu - 1 The George L. Argyros School of Business & Economics, Chapman University, One University Drive, Orange, CA 92866, USACharles L Munson - 2 Department of Management and Operations, Washington State University, P.O. Box 644736, Pullman, WA 99164-4736, USA
- Publication Details
- International journal of procurement management, Vol.4(1), pp.20-36
- Academic Unit
- Finance and Management Science, Department of
- Publisher
- Inderscience Publishers
- Identifiers
- 99900546928301842
- Resource Type
- Journal article