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IEOR 165 Lecture 1 May 26 2009

IEOR 165 Lecture 1 May 26 2009 - Lecture Notes IEOR 165 |...

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Lecture Notes IEOR 165 | George Shanthikumar Tu W Th 2-4:30 pm | 3113 Etcheverry 5 HW Assignments (not graded) provide questions for quizzes and final 2 Quizes | 40% (2 questions each) Final | 40% (4 questions) Project | 20% Statistics Objective: Decisions need to be based on real life observations Challenge: Assumptions are, in real life, necessary to assess (1) Create stochastic model (model that includes uncertainty, characterizeable by probability) (2) Collect data (3) Optimize the model Newsvendor Problem (1) Assume: fix price, marketing is out of question (2) Problem: Maybe Debbie shouldn’t buy too many. So Debbie asks Tommy for information (3) Assess: Data collected from Tommy (60 days of newpaper sales) 124 37 18 4 54 83 56 4 73 46 8 4 4 7 8 10 122 104 20 7 14 19 65 107 124 15 10 5 14 13 65 76 7 41 46 25 21 39 71 64 17 86 6 5 89 22 33 52 38 59 54 11 3 52 2 42 19 102 17 28 Statistics: Data | Average: 39.52 (4) Suggestion: Let x be the order quantity. What we have is the demand data: Dk (demand in the period k, k = 1,…,60 = = - x argmin 160k 160x Dk2 =39.52 Two models 1. Retrospective optimization vs. Stochastic optimization
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