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Some Conjectures for the Newsvendor Problem under Progressive Multiple Discounts  

Won, You-Kyung (군산대학교 경영학부)
Publication Information
Journal of the Korean Operations Research and Management Science Society / v.36, no.3, 2011 , pp. 27-43 More about this Journal
Abstract
This paper investigates properties of the newsvendor problem under a schedule involving progressive multiple discounts compared with the standard newsvendor problem under a no-discounts schedule. Unlike most conventional approaches using the criticial fractile to analyze the retailer and/or supplier behavior(s) in the newsvendor problem, our approach uses riskless profit. From the properties revealed through a series of computational experiments, two conjectures regarding the relationship between the expected profits of both newsvendor problems as a generalization over Khouja's argument (1995) are raised. Those conjectures encourage newsvendors who may face budget or warehouse capacity restriction to use the extended model under a multiple-discounts schedule rather than the standard model with no-discounts schedule because they apply for every order quantity as well as the optimal order quantity. In addition to the conjectures, some insightful results are found to justify the implementation of a multiple-discounts schedule from the computational experiments and a new interpretation for implementation of a multiple-discounts schedule that has not been addressed in Khouja is provided.
Keywords
Newsvendor Problem; Progressive Multiple Discounts;
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