INTEGER SOLUTIONS TO THE NEWSVENDOR PROBLEM WITH PRICING: ROUNDING ERRORS AND COMPARISON WITH A DISCRETE-SOLUTION MODEL

摘要

In the single period, newsvendor problem with pricing (NPP), the seller of a perishable product sets the selling price and stocking quantity before realizing exact, price-dependent demand. It is assumed that the seller knows the demand distribution. The seller incurs a cost on each unit stocked regardless of whether or not a unit is sold. In this article, we first study the impacts of requiring continuous-model NPP solutions to include only integer values of stocking quantity. Then, we compare those results with those from a second model that was specifically designed to allow for only integer values of stocking quantity.