On the unimodality of the profit function of the pricing newsvendor

Ye Lu, David Simchi-Levi

    Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

    28 Citations (Scopus)

    Abstract

    In this note, we study the price-setting newsvendor problem. We use three conditions, the log-convexity of the coefficient of variation, the log-concavity of the deterministic profit function, and the log-convexity of the random noise's expectation conditional on having leftover inventory to establish the log-concavity of the retailer's expected profit function. This new result is complementary to existing results and removes some assumptions in the pricing and inventory coordination literature. It also addresses the conjecture made by Petruzzi and Dada (1999), and can be applied in the pricing game. © 2013 Production and Operations Management Society.
    Original languageEnglish
    Pages (from-to)615-625
    JournalProduction and Operations Management
    Volume22
    Issue number3
    DOIs
    Publication statusPublished - May 2013

    Research Keywords

    • log-concavity
    • newsvendor with price effect
    • pricing game

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