A Risk-Reward Competitive Analysis for the Newsboy Problem with Range Information

Authors:
Guiqing Zhang;Yinfeng Xu
Affiliations:
School of Management, Xi'an Jiaotong University, Xi'an, China 710049;School of Management, Xi'an Jiaotong University, Xi'an, China 710049 and The State Key Lab for Manufacturing Systems Engineering, Xi'an, China 710049
Venue:
COCOA '09 Proceedings of the 3rd International Conference on Combinatorial Optimization and Applications
Year:
2009

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Abstract

Recently, the single-period, single-item newsboy problem with limited distributional information (e.g., range, mean, mode, variance, symmetry) has been widely studied. However, the existing newsboy models with partial information are only fit to risk-neutral inventory managers. This paper considers the newsboy problem with range information. Based on the competitive ratio analysis, which guarantees a certain performance level under all possible input sequences, we construct a framework to manage risk and reward of newsboy problems under different forecasts (i.e. certain forecasts; probability forecasts; probability distributions). Comparing the existing studies, this approach helps the newsboy flexibly choose the optimal reward strategies, according to his own risk tolerance levels and different forecasts.