TY - JOUR

T1 - The distribution-free newsboy problem with multiple discounts and upgrades

AU - Moon, Ilkyeong

AU - Yoo, Dong Kyoon

AU - Saha, Subrata

PY - 2016/1/1

Y1 - 2016/1/1

N2 - Most papers on the newsboy problem assume that excess inventory is either sold after discount or discarded. In the real world, overstocks are handled with multiple discounts, upgrades, or a combination of these measures. For example, a seller may offer a series of progressively increasing discounts for units that remain on the shelf, or the seller may use incrementally applied innovations aimed at stimulating greater product sophistication. Moreover, the normal distribution does not provide better protection than other distributions with the same mean and variance. In this paper, we find the differences between normal distribution approaches and distribution-free approaches in four scenarios with mean and variance of demand as the only available data to decision-makers. First, we solve the newsboy problem by considering multiple discounts. Second, we formulate and solve the newsboy problem by considering multiple upgrades. Third, we formulate and solve a mixed newsboy problem characterized with multiple discounts and upgrades. Finally, we extend the model to solve a multiproduct newsboy problem with a storage or a budget constraint and develop an algorithm to find the solutions of the models. Concavity of the models is proved analytically. Extensive computational experiments are presented to verify the robustness of the distribution-free approach. The results show that the distribution-free approach is robust.

AB - Most papers on the newsboy problem assume that excess inventory is either sold after discount or discarded. In the real world, overstocks are handled with multiple discounts, upgrades, or a combination of these measures. For example, a seller may offer a series of progressively increasing discounts for units that remain on the shelf, or the seller may use incrementally applied innovations aimed at stimulating greater product sophistication. Moreover, the normal distribution does not provide better protection than other distributions with the same mean and variance. In this paper, we find the differences between normal distribution approaches and distribution-free approaches in four scenarios with mean and variance of demand as the only available data to decision-makers. First, we solve the newsboy problem by considering multiple discounts. Second, we formulate and solve the newsboy problem by considering multiple upgrades. Third, we formulate and solve a mixed newsboy problem characterized with multiple discounts and upgrades. Finally, we extend the model to solve a multiproduct newsboy problem with a storage or a budget constraint and develop an algorithm to find the solutions of the models. Concavity of the models is proved analytically. Extensive computational experiments are presented to verify the robustness of the distribution-free approach. The results show that the distribution-free approach is robust.

UR - http://www.scopus.com/inward/record.url?scp=84987876620&partnerID=8YFLogxK

U2 - 10.1155/2016/2017253

DO - 10.1155/2016/2017253

M3 - Journal article

AN - SCOPUS:84987876620

VL - 2016

JO - Mathematical Problems in Engineering

JF - Mathematical Problems in Engineering

SN - 1024-123X

M1 - 2017253

ER -