Please use this identifier to cite or link to this item: https://doi.org/10.1287/msom.1120.0387
Title: A multiordering newsvendor model with dynamic forecast evolution
Authors: Wang, T. 
Atasu, A.
Kurtuluş, M.
Keywords: Dynamic ordering
Forecast evolution
MMFE
Newsvendor
Issue Date: 2012
Source: Wang, T., Atasu, A., Kurtuluş, M. (2012). A multiordering newsvendor model with dynamic forecast evolution. Manufacturing and Service Operations Management 14 (3) : 472-484. ScholarBank@NUS Repository. https://doi.org/10.1287/msom.1120.0387
Abstract: We consider a newsvendor who dynamically updates her forecast of the market demand over a finite planning horizon. The forecast evolves according to the martingale model of forecast evolution (MMFE). The newsvendor can place multiple orders with increasing ordering cost over time to satisfy demand that realizes at the end of the planning horizon. In this context, we explore the trade-off between improving demand forecast and increasing ordering cost. We show that the optimal ordering policy is a state-dependent base-stock policy and analytically characterize that the base-stock level depends on the information state in a linear (loglinear) fashion for additive (multiplicative) MMFE. We also study a benchmark model where the newsvendor is restricted to order only once. By comparing the multiordering and single-ordering models, we quantify the impact of the multiordering strategy on the newsvendor's expected profit and risk exposure. © 2012 INFORMS.
Source Title: Manufacturing and Service Operations Management
URI: http://scholarbank.nus.edu.sg/handle/10635/44082
ISSN: 15234614
DOI: 10.1287/msom.1120.0387
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