The opportunistic newsvendor problem: Defining the optimal purchase quantity of resalable items, whose value may appreciate

Zammori, F.; Romagnoli, G.; Filippelli, S.

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Decision Science Letters

ISSN 1929-5812 (Online) - ISSN 1929-5804 (Print) Quarterly Publication Volume 12 Issue 1 pp. 13-28 , 2023

The opportunistic newsvendor problem: Defining the optimal purchase quantity of resalable items, whose value may appreciate Pages 13-28 Download PDF

Authors: Francesco Zammori, Giovanni Romagnoli, Serena Filippelli

DOI: 10.5267/j.dsl.2022.11.001

Keywords: Newsvendor problem, Opportunistic purchases, Perishable items, Collectible items, Numerical optimization

Abstract: With Newsvendor Problem (NvP) we refer to a specific class of inventory management problems, valid for a single item with stochastic demand over a single period. In the standard version, the newsvendor is allowed to issue a single order, before he or she can observe the actual demand. Since the newsvendor can face both overage and underage costs, due to lost sales or residual stock, the objective is to define the optimal order size that maximizes the expected profit. In this paper, we consider a specific version of the NvP, in which the buyer has the opportunity to make a last and single order for opportunistic reasons. Specifically, we consider discontinued, collectible items, for which demand will not vanish and whose value might appreciate. Hence, the objective is to define the optimal quantity that should be purchased, just before the item is retired from the market or sold-out, and that should be sold as soon as the price rises over a predefined target level. An optimal solution, maximizing the expected profit, is obtained both in case of negligible and non-negligible stockholding costs. In the latter case, to obtain the optimal solution in implicit form, some simplifying assumptions are needed. Hence, a thorough numerical analysis is finally performed, as a way to empirically demonstrate both the robustness and the accuracy of the model, in several scenarios differentiated in terms of costs and customers’ demand.

How to cite this paper

 Zammori, F., Romagnoli, G & Filippelli, S. (2023). The opportunistic newsvendor problem: Defining the optimal purchase quantity of resalable items, whose value may appreciate.Decision Science Letters , 12(1), 13-28.

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