Abstract
This chapter investigates a portfolio approach to multi-product newsvendor problem with budget constraint, in which the procurement strategy for each newsvendor product is designed as portfolio contract. A portfolio contract consists of a fixed-price contract and an option contract. We model the problem as an expected profit-maximization model, and propose an efficient solution procedure after investigating the structural properties of the model. We conduct numerical studies to show the efficiency of the proposed solution procedure, and to compare three models with different procurement contracts, i.e., fixed-price contract, option contract, and portfolio contract. Numerical results are shown to demonstrate the advantage of the portfolio model, and sensitivity analysis is provided for obtaining some managerial insights.
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Notes
- 1.
The previous version of this work has been published in Computers & Industrial Engineering, 2010, 58: 759-765.
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Acknowledgements
The authors would like to thank the reviewers for their comments, which improved the manuscript. This work is supported by National Natural Science Foundation of China (Grants No. 70801065 and 71171206), National Natural Science Foundation of China major program (Grant No. 71090401/71090400), and the Fundamental Research Funds for the Central Universities of China.
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Zhang, B., Hua, Z. (2012). A Portfolio Approach to Multi-product Newsvendor Problem with Budget Constraint. In: Choi, TM. (eds) Handbook of Newsvendor Problems. International Series in Operations Research & Management Science, vol 176. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-3600-3_16
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DOI: https://doi.org/10.1007/978-1-4614-3600-3_16
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