Abstract
Recently, Lee and Hsu (2011) study the advertising effect on the distribution-free newsboy problem. In one of their results, they show that the optimal expenditure on advertising, the optimal order quantity and the optimal lower bound on the expected profit increase with the advertising effect parameters. Although this result holds in general, it requires additional assumptions. In this note we provide the necessary and sufficient conditions under which the statements of Lee and Hsu (2011) hold. These conditions are shown to be violated if the advertising expenditure is too low or there is a very small difference between the optimal profit and the profit without advertising.
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