Managing reward and risk of the newsboy problem with range information

Abstract

Recently, the single-period, single-item newsboy problem for the case where demand distribution is limited (e.g., range, mean, mode, variance, symmetry) has been widely studied. However, the existing newsboy models with partial information are fit to risk-neutral inventory managers, and there are few studies about the risk analysis of the newsboy problems with partial information. This paper considers the newsboy problem with range information. Our approach employs the competitive ratio analysis which guarantees a certain performance level under all possible input sequences, and constructs a framework to manage risk and reward of newsboy problems under different forecasts (i.e., certain forecast, probability forecast and probability distribution). Comparing with the existing studies, this approach can help the newsboy choosing the optimal reward/risk order strategies with great flexibility, according to his/her own risk/reward tolerance levels and different forecasts.