Resource title

The Newsvendor with princing: a stochastic elasticity perspective

Resource image

image for OpenScout resource :: The Newsvendor with princing: a stochastic elasticity perspective

Resource description

We introduce a measure of elasticity of stochastic demand, called the elasticity of lost sales, which offers a unifying perspective on the well-known newsvendor with pricing problem. This new concept provides a framework to characterize structural results for coordinated and uncoordinated pricing and inventory strategies. Concavity and submodularity of the profit function and monotonicity of the inventory/price policies are characterized by monotonicity conditions, or bounds, on the lost sales elasticity. These elasticity conditions are satisfied by most relevant demand models in the literature. Our results explain, unify and complement previous work on price-setting newsvendor models.

Resource author

Resource publisher

Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/inseadwp2007/2007-55.pdf

Resource license

Copyright INSEAD. All rights reserved