THE NEWSVENDOR PROBLEM WITH PRICING FROM FIRST PRINCIPLES

摘要

In the newsvendor problem with pricing, the seller of a homogeneous product sets inventory level(s) and corresponding price(s) before realizing exact demand. Previous works often consider either one inventory level (likely for simplicity), or, in the case of unknown sizes of customer base, the number of inventory levels is set as the number of possible sizes of customer base. Here, using first principles, we provide justification for using a single inventory level, regardless of whether the size of customer base is deterministic or stochastic.