Quality of decisions in inventory management problems depends on accuracy of parameter estimates used for decision making. In many situations, error in decision making is unavoidable. In such cases, understanding sensitivity of objective function to sub-optimal decisions is necessary for better implementation of the model. We study sensitivity of expected demand-supply mismatch cost to sub-opti...

T paper studies a manufacturer that sells to a newsvendor retailer who can improve the quality of her demand information by exerting costly forecasting effort. In such a setting, contracts play two roles: providing incentives to influence the retailer’s forecasting decision and eliciting information obtained by forecasting to inform production decisions. We focus on two forms of contracts that ...

We analyze optimal production and pricing strategies in the single period (newsvendor) dual sourcing problem that entails local and offshore suppliers. The local supplier is used reactively as an emergency source following the realization of random demand. A multiplicative demand model is employed. We show that dual sourcing flexibility may decrease optimal price when emergency supply cost is s...

For the newsvendor inventory control problem with ambiguous demand, Liyanage and Shanthikumar (2005) show that integrating parameter estimation and optimization leads to a better solution compared with the traditional approach. However, how to find the optimal operational statistics is left as an open question in their paper. We derive the optimal operational statistics using a non-informative ...

An e ective algorithm for solving stochastic resource allocation problems is to build piecewise linear, concave approximations of the recourse function based on sample gradient information. Algorithms based on this approach are proving useful in application areas such as the newsvendor problem, physical distribution and eet management. These algorithms require the adaptive estimation of the app...

Because transportation services provided by container lines to forwarders cannot be stored, they can be considered to be newsvendor-type products. This paper discusses a method used to optimize container lines’ freight tariffs in order to maximize their expected profit by considering changes in order quantities made by forwarders responding to the price schemes suggested by the container lines....

In this paper, two models are considered which differ in terms of information completeness. The first model involves the retailer having incomplete information regarding the state of customers demand. The second model involves the retailer having full information on the state of customers demand. Step function (here called Gauss function) can be applied such as the cost for mailing letters or p...

We propose a novel analytic approach for the comparative statics analysis of operations management problems on the capacity investment decision and the influenza (flu) vaccine composition decision. Our approach involves exploiting the properties of the underlying mathematical models, and linking those properties to the concept of stochastic orders relationship. The use of stochastic orders allo...

Fund managers have to decide the amount of a fund’s assets that should be kept in cash, considering the tradeoff between being able to meet shareholder redemptions and minimizing the opportunity cost from lost investment opportunities. In addition, they have to consider redemptions by individuals as well as institutional investors, the current performance of the stock market and interest rates,...