Publication: Multi-product newsvendor problem with value-at-risk considerations
Program
KU-Authors
KU Authors
Co-Authors
Özler, Aysun
Publication Date
Language
Type
Embargo Status
Journal Title
Journal ISSN
Volume Title
Alternative Title
Abstract
We consider the single period stochastic inventory (newsvendor) problem with downside risk constraints. The aim in the classical newsvendor problem is maximizing the expected profit. This formulation does not take into account the risk of earning less than a desired target profit or losing more than an acceptable level due to the randomness of demand. We utilize Value at Risk (VaR) as the risk measure in a newsvendor framework and investigate the multi-product newsvendor problem under a VaR constraint. To this end, we first derive the exact distribution function for the two-product newsvendor problem and develop an approximation method for the profit distribution of the N-product case (N>2). A mathematical programming approach is used to determine the solution of the newsvendor problem with a VaR constraint. This approach allows us to handle a wide range of cases including the correlated demand case that yields new results and insights. The accuracy of the approximation method and the effects of the system parameters on the Solution are investigated numerically.
Source
Publisher
Elsevier Science Bv
Subject
Industrial engineering, Manufacturing Engineering, Operations research, Management science
Citation
Has Part
Source
International Journal of Production Economics
Book Series Title
Edition
DOI
10.1016/j.ijpe.2008.09.014