4QA3 F12 Week 8 Lecture Notes

4qa3 f12 a gandomi 25 the essential characteristic

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Unformatted text preview: only a single procurement is made. ●  Some real- world applications: stocking of style goods, special season items and perishable items (e.g., newspaper). ●  This class of problems is often referred to as the the “newsboy” model. ●  These models have the objective of balancing the underage cost and the overage cost. 4QA3 F12 A. Gandomi 26 ●  At the start of each day, a newsvendor must decide on the number of papers to purchase. Daily sales cannot be predicted exactly, and are represented by the random variable, D. ●  Costs: o  co: unit cost of overage o  cu: unit cost of underage ●  Expected cost function: Q 0 ●  ∞ Q G (Q ) = co ∫ (Q − x ) f ( x ) dx + cu ∫ ( x − Q ) f ( x ) dx It can be shown that: Demand CDF 4QA3 F12 cu F (Q ) = cu + co * A. Gandomi Criti...
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This document was uploaded on 04/01/2014.

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