Abstract: We consider a price-setting newsvendor model in which a firm needs to make joint inventory and pricing decisions before the selling season. The supply process is uncertain such that the received quantity is the product of the order quantity and a random yield rate. Two cost structures are investigated, the in-house production case in which the firm pays for the input quantity and the procurement case in which the firm pays for the quantity received only. Our objective is to investigate the effect of yield randomness on optimal decisions and expected profit. By using the theory of stochastic comparisons, we find that under both cost structures, a less variable yield rate leads to a lower optimal price and a higher expected profit. Moreover, we show that in the in-house production case, a stochastically larger yield rate also results in a lower optimal price and a higher profit, but this is not true in the procurement case. Examples show that the effect of supply uncertainty on optimal order quantity is not universal.

Keywords: Supply uncertainty, Price-dependent newsvendor model, Stochastic comparisons, Emergency supply option

原文刊于《European Journal of Operational Research》，227(3), 423-433, 2013。 该文被SSCI、SCI、EI同时收录。《European Journal of Operational Research》是由Elsevier发行的运筹与管理科学领域国际知名期刊之一，在2012年SCI大类分区管理科学类中总排名第6，位于2区第二名，其5-Year Impact Factor为2.524。