期刊
INTERNATIONAL JOURNAL OF INFORMATION TECHNOLOGY & DECISION MAKING
卷 7, 期 2, 页码 217-224出版社
WORLD SCIENTIFIC PUBL CO PTE LTD
DOI: 10.1142/S0219622008002910
关键词
inventory; optimization; newsvendor problem; simulation
We consider a firm selling two similar products with different prices. When the lower-priced product is out of stock, the firm supplies the customer a higher-priced product with the lower-priced product price. The policy is called free upgrade. In this paper, we study the profitability of such policy. We formulate the problem as a two-product newsvendor problem, and prove that the firm achieves more profit with the free upgrade policy. We propose a simulation algorithm to find the solution and demonstrate our findings with some numerical examples.
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