Risk in inventory models: The case of the newsboy problem - optimality conditions. (English) Zbl 0693.90033

Chung, Kee H.

J. Oper. Res. Soc. 41, No. 2, 173-176 (1990).

Summary: Recently, M. Anvari [ibid. 38, 625-632 (1987; Zbl 0617.90017)] employed the capital-asset pricing model for the analysis of the newsboy problem and showed how the covariance risk affects the optimal inventory policy. The purpose of this paper is to sharpen the optimality conditions given by the article and hence to provide a simple method for finding the solution. Under reasonable assumptions, this paper shows that the optimal ordering policy can be described by a single equation, regardless of the sign of the covariance term.

MSC:

90B05	Inventory, storage, reservoirs
91B24	Microeconomic theory (price theory and economic markets)

Keywords:

capital-asset pricing; newsboy problem; covariance risk; optimal inventory policy; optimal ordering policy

Citations:

Zbl 0617.90017