TY - JOUR
T1 - On the unimodality of the profit function of the pricing newsvendor
AU - Lu, Ye
AU - Simchi-Levi, David
PY - 2013/5
Y1 - 2013/5
N2 - 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.
AB - 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.
KW - log-concavity
KW - newsvendor with price effect
KW - pricing game
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U2 - 10.1111/j.1937-5956.2012.01419.x
DO - 10.1111/j.1937-5956.2012.01419.x
M3 - RGC 21 - Publication in refereed journal
SN - 1059-1478
VL - 22
SP - 615
EP - 625
JO - Production and Operations Management
JF - Production and Operations Management
IS - 3
ER -