newsvendor model Flashcards
1
Q
characteristics of newsvendor pbl
A
- uncertain demand
- perishable/seasonal products
- order must be placed before demand is realized
2
Q
Marginal analysis key idea
A
at the optimal order quantity, the expected value profit of ordering one extra unit is 0
3
Q
Steps of marginal analysis
A
1) demand forecast
2) collecting cost info
3) compute expected value of additional unit
4) compute the optimal stocking level X by setting marginal value to zero
4
Q
2 cases of newsvendor problem
A
- continuous
- discrete distribution
5
Q
Normal demand case
A
optimal stocking level: x = mu + z*variance
6
Q
Discrete demand case
A
optimal stocking level is the smallest value such that P(d<= X) >= critical ratio
7
Q
cost tradeoffs in the newsvendor model
A
- overstock and understock costs
- use critical fractile to find optimal stocking level
8
Q
A
