scholarly journals Single-Period Capacity and Demand Allocation Decision Making under Uncertainty

2021 ◽  
Author(s):  
Sangdo Choi
Keyword(s):  
Hospitality Industry ◽  
Profit Maximization ◽  
Discrete Distribution ◽  
Capacity Allocation ◽  
Newsvendor Model ◽  
Optimal Sequence ◽  
Numerical Studies ◽  
Single Period ◽  
Number Of Customers ◽  
Demand Allocation

The newsvendor model deals with a single-period capacity allocation problem under uncertainty. The real world examples include perishable products (e.g., fish, vegetable), holiday-related products (e.g., Easter, Christmas, Halloween), seasonal products (e.g., fashion), and promotional products. This section addresses three newsvendor models: traditional newsvendor, inverse newsvendor, and sequential newsvendor models. The main decision under the traditional newsvendor setting is capacity allocation (i.e., how much to order), whereas the main decision under the inverse newsvendor setting is demand allocation (i.e., how many customers to be served) under the fixed capacity. This section demonstrates how to compare profit maximization approach to customer-oriented approach under the traditional newsvendor. The inverse newsvendor applies to revenue management for the hospitality industry. The sequential newsvendor model determines the optimal sequence when the number of customers to be served (determined by the inverse newsvendor model) is given. Normal distribution is considered for analytical solution and numerical studies. In addition, a discrete distribution is considered for numerical studies.

scholarly journals Coping with Loss Aversion in the Newsvendor Model

2015 ◽  
Vol 2015 ◽  
pp. 1-11 ◽  
Author(s):  
Jianwu Sun ◽  
Xinsheng Xu
Keyword(s):  
Expected Utility ◽  
Loss Aversion ◽  
Confidence Level ◽  
Profit Maximization ◽  
Optimal Order ◽  
Market Demand ◽  
Newsvendor Model ◽  
Order Quantity ◽  
Decision Bias ◽  
Optimal Order Quantity

We introduce loss aversion into the decision framework of the newsvendor model. By introducing the loss aversion coefficientλ, we propose a novel utility function for the loss-averse newsvendor. First, we obtain the optimal order quantity to maximize the expected utility for the loss-averse newsvendor who is risk-neutral. It is found that this optimal order quantity is smaller than the expected profit maximization order quantity in the classical newsvendor model, which may help to explain the decision bias in the classical newsvendor model. Then, to reduce the risk which originates from the fluctuation in the market demand, we achieve the optimal order quantity to maximize CVaR about utility for the loss-averse newsvendor who is risk-averse. We find that this optimal order quantity is smaller than the optimal order quantity to maximize the expected utility above and is decreasing in the confidence levelα. Further, it is proved that the expected utility under this optimal order quantity is decreasing in the confidence levelα, which verifies that low risk implies low return. Finally, a numerical example is given to illustrate the obtained results and some management insights are suggested for the loss-averse newsvendor model.

scholarly journals Further Investigations on the Dynamics and Multistability Coexisted in a Memory-Based Cobweb Model

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-13
Author(s):  
S. S. Askar
Keyword(s):  
Fixed Point ◽  
Equilibrium Point ◽  
Profit Maximization ◽  
Period Doubling ◽  
Speed Of Adjustment ◽  
Discrete Dynamic ◽  
Cobweb Model ◽  
Numerical Studies ◽  
Market Clearing Price ◽  
The Stability

Based on a nonlinear demand function and a market-clearing price, a cobweb model is introduced in this paper. A gradient mechanism that depends on the marginal profit is adopted to form the 1D discrete dynamic cobweb map. Analytical studies show that the map possesses four fixed points and only one attains the profit maximization. The stability/instability conditions for this fixed point are calculated and numerically studied. The numerical studies provide some insights about the cobweb map and confirm that this fixed point can be destabilized due to period-doubling bifurcation. The second part of the paper discusses the memory factor on the stabilization of the map’s equilibrium point. A gradient mechanism that depends on the marginal profit in the past two time steps is adopted to incorporate memory in the model. Hence, a 2D discrete dynamic map is constructed. Through theoretical and numerical investigations, we show that the equilibrium point of the 2D map becomes unstable due to two types of bifurcations that are Neimark–Sacker and flip bifurcations. Furthermore, the influence of the speed of adjustment parameter on the map’s equilibrium is analyzed via numerical experiments.

scholarly journals Hedging Risks in the Loss-Averse Newsvendor Problem with Backlogging

Mathematics ◽  
2019 ◽  
Vol 7 (5) ◽  
pp. 429 ◽  
Author(s):  
Xiaoqing Liu ◽  
Felix T. S. Chan ◽  
Xinsheng Xu
Keyword(s):  
Value At Risk ◽  
Profit Maximization ◽  
Newsvendor Problem ◽  
Sensitivity Analyses ◽  
Conditional Value At Risk ◽  
Optimal Order ◽  
Newsvendor Model ◽  
Order Quantity ◽  
Decision Bias ◽  
Optimal Order Quantity

This paper studies the optimal order decisions for the loss-averse newsvendor problem with backordering and contributes to the risk hedging issue in the newsvendor model. The Conditional Value-at-Risk (CVaR) measure is applied to quantify the potential risks for the loss-averse newsvendor in a backordering setting, and we obtain the optimal order quantity for a loss-averse newsvendor to maximize the CVaR of utility. It is found that the optimal order quantity to maximize the CVaR objective could be bigger or smaller than the expected profit maximization (EPM) order quantity, which provides an alternative explanation on decision bias in the newsvendor model. This study also reveals that the optimal order quantity for a loss-averse newsvendor to maximize expected utility with backordering is smaller than the EPM order quantity, which implies that backordering encourages the loss-averse newsvendor to order fewer items. Sensitivity analyses are performed to investigate the properties of the optimal order quantities and managerial insights are suggested. This paper provides a novel method for the risk management of the loss-averse newsvendor model and presents several new ordering policies for the retailers in practice.

Supply Chain Contracting with Linear Utility Function

2017 ◽  
Vol 10 (2) ◽  
pp. 1-20 ◽  
Author(s):  
Ningning Wang ◽  
Jibao Gu ◽  
Qinglong Gou ◽  
Jinfeng Yue
Keyword(s):  
Decision Making ◽  
Supply Chain ◽  
Utility Function ◽  
Wholesale Price ◽  
Profit Maximization ◽  
Newsvendor Model ◽  
Supply Chain Contracting ◽  
Linear Utility ◽  
Linear Utility Function ◽  
Linear Setting

The supply chain contracting has traditionally been based on the profit maximization assumption. Recent research has shown that some behavior factors may influence the decision making of supply chain members. The authors utilize a linear utility function to depict such behavior factors and incorporate these into the newsvendor model. The linear utility function provides sufficient flexibility to better capture people's various behavior factors. By supposing the agents are concerned with behavior factors, the authors first investigate how the factors affect the supply chain under wholesale price contract, and find that they do not influence coordination condition, but can adjust the distribution of profits. Then they extend their study to other four common contracts with a similar method and systematically demonstrate that the behavior of agents in such a linear setting has no effect on the conditions of coordinating supply chain.

scholarly journals The Value Of Information Sharing In Capacity Allocation In Serial Service Operations

2016 ◽  
Vol 32 (5) ◽  
pp. 1459
Author(s):  
Jin Kyung Kwak
Keyword(s):  
Information Sharing ◽  
Value Of Information ◽  
Cost Savings ◽  
Service Operations ◽  
Capacity Allocation ◽  
Previous Period ◽  
Waiting Cost ◽  
Two Stages ◽  
The Cost ◽  
Number Of Customers

In this study, we investigate the value of information sharing in serial service operations. When services are offered sequentially in two stages, we may use the demand information from the previous period in assigning servers at each stage. This study compares an information-based policy with a basic policy for capacity allocation in serial service operations in order to explore the value of information shared between the two stages. Among several possible candidates for an information-based policy, we chose an assigning rule such that the number of servers at the latter stage is determined by the number of customers served out of the prior stage in the previous period. On the other hand, the basic policy is designated as an assigning rule such that the two stages have the same constant number of servers through all periods. Assuming independent and identically distributed Normal demands with various parameters, we conducted computational experiments to compute the cost savings from using the information-based policy over the basic policy. The cost of using each policy includes the labor cost and the waiting cost. The results show that the cost savings of information sharing are relatively low and that the value of information sharing increases with demand variability or with unit waiting cost. These results give us some managerial insights on capacity allocation in serial service operations. 

A heuristic approach to in-season capacity allocation in a multi-product newsvendor model

Omega ◽  
2020 ◽  
Vol 95 ◽  
pp. 102252
Author(s):  
Moutaz Khouja ◽  
Eliana Christou ◽  
Antonis Stylianou
Keyword(s):  
Capacity Allocation ◽  
Heuristic Approach ◽  
Newsvendor Model

scholarly journals A Combined Average-Case and Worst-Case Analysis for an Integrated Hub Location and Revenue Management Problem

2019 ◽  
Vol 2019 ◽  
pp. 1-13 ◽  
Author(s):  
Jia-Zhen Huo ◽  
Yan-Ting Hou ◽  
Feng Chu ◽  
Jun-Kai He
Keyword(s):  
Revenue Management ◽  
Profit Maximization ◽  
Transportation Cost ◽  
Case Analysis ◽  
Capacity Allocation ◽  
Worst Case Analysis ◽  
Management Problem ◽  
Hub Location ◽  
Worst Case ◽  
Average Case

This paper investigates joint decisions on airline network design and capacity allocation by integrating an uncapacitated single allocation p-hub median location problem into a revenue management problem. For the situation in which uncertain demand can be captured by a finite set of scenarios, we extend this integrated problem with average profit maximization to a combined average-case and worst-case analysis of this integration. We formulate this problem as a two-stage stochastic programming framework to maximize the profit, including the cost of installing the hubs and a weighted sum of average and worst case transportation cost and the revenue from tickets over all scenarios. This model can give flexible decisions by putting the emphasis on the importance of average and worst case profits. To solve this problem, a genetic algorithm is applied. Computational results demonstrate the outperformance of the proposed formulation.

scholarly journals Equilibrium Customer Strategies in the Single-Server Constant Retrial Queue with Breakdowns and Repairs

2014 ◽  
Vol 2014 ◽  
pp. 1-14 ◽  
Author(s):  
Zhengwu Zhang ◽  
Jinting Wang ◽  
Feng Zhang
Keyword(s):  
Retrial Queue ◽  
Profit Maximization ◽  
Optimal Strategies ◽  
The State ◽  
Equilibrium Analysis ◽  
Arrival Process ◽  
Single Server ◽  
Retrial Queueing System ◽  
Exact Number ◽  
Number Of Customers

We consider a single-server constant retrial queueing system with a Poisson arrival process and exponential service and retrial times, in which the server may break down when it is working. The lifetime of the server is assumed to be exponentially distributed and once the server breaks down, it will be sent for repair immediately and the repair time is also exponentially distributed. There is no waiting space in front of the server and arriving customers decide whether to enter the retrial orbit or to balk depending on the available information they get upon arrival. In the paper, Nash equilibrium analysis for customers’ joining strategies as well as the related social and profit maximization problems is investigated. We consider separately the partially observable case where an arriving customer knows the state of the server but does not observe the exact number of customers waiting for service and the fully observable case where customer gets informed not only about the state of the server but also about the exact number of customers in the orbit. Some numerical examples are presented to illustrate the effect of the information levels and several parameters on the customers’ equilibrium and optimal strategies.

Sign in / Sign up

Export Citation Format

Share Document