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Newsvendor Problem Set


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Unformatted text preview: lyMere purchase to maximize its expected profit at each cost level? Revenue Management problem PanAir operates a flight from Indianapolis to San Francisco that has 250 seats. PanAir offers a high and low fare. There is ample demand for the low fare. Low fare customers buy in advance of high fare customers. Demand for the high fare is Normally distributed with a mean of 100 and a standard deviation of 40. The high fare is $700 and the low fare is $450. How many seats should PanAir protect for the high paying customers? Sourcing problem Teddy Bower sources a parka from an Asian supplier for $10 each and sells to customer for $22 each. Leftover parkas at the end of the season have no value. The demand forecast is normally distributed with mean 2,100 and standard deviation 1,200. Now suppose Teddy Bower found a reliable vendor in the United States t...
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