Expected Value of Distribution Information for the Newsvendor Problem
Jinfeng Yue, Bintong Chen, Min-Chiang Wang
Operations Research · 2006 · Volume 54 · Issue 6
Abstract
This paper extends previous work on the distribution-free newsvendor problem, where only partial information about the demand distribution is available. More specifically, the analysis assumes that the demand distribution f belongs to a class of probability distribution functions (pdf) ℱ with mean μ and standard deviation σ. While previous work has examined the expected value of distribution information (EVDI) for a particular order quantity and a particular pdf f , this paper aims at computing the maximum EVDI over all f ∈ ℱ for any order quantity. In addition, an optimization procedure is provided to calculate the order quantity that minimizes the maximum EVDI.
Keywords
inventory/production: perishable/aging items, inventory/production: uncertainty, decision analysis: applications
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