The Value of Information in the Newsvendor Problem
Abstract: In this work, we investigate the value of information when the decision-maker knows whether a perishable product will be in high, moderate or low demand before placing his order. We derive optimality conditions for the probability of the baseline scenario under symmetric distributions and analyze the impact of the cost parameters on simulation experiments. Our results provide managers with deeper insights into the information that will help them reach better decisions.
Keywords: newsvendor problem, advance information, value of information
Category 1: Applications -- OR and Management Sciences
Category 2: Applications -- OR and Management Sciences (Production and Logistics )
Citation: Technical Report, Dept of Industrial and Systems Engineering, Lehigh University, Bethlehem, PA. May 2007.
Entry Submitted: 05/25/2007
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