Chapter

Building Intuition

Volume 115 of the series International Series in Operations Research & Management Science pp 115-134

The Newsvendor Problem

  • Evan L. Porteus

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The newsvendor problem has numerous applications for decision making in manufacturing and service industries as well as decision making by individuals. It occurs whenever the amount needed of a given resource is random, a decision must be made regarding the amount of the resource to have available prior to finding out how much is needed, and the economic consequences of having “too much” and “too little” are known.