Research on newsvendor model under retail price fluctuation sales strategy

MENG Zhiqing, ZHENG Minchao

Systems Engineering - Theory & Practice ›› 2020, Vol. 40 ›› Issue (10) : 2648-2657.

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Systems Engineering - Theory & Practice ›› 2020, Vol. 40 ›› Issue (10) : 2648-2657. DOI: 10.12011/1000-6788-2019-0539-10

Research on newsvendor model under retail price fluctuation sales strategy

  • MENG Zhiqing, ZHENG Minchao
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Abstract

Price fluctuation sales is popular in lots of trading activities, which may lead to uncertainty of demand, making retailers more likely to suffer from understock or overstock. Thus, the ordering problem is important when price fluctuation occurs. This paper studies one-period ordering problem when retail prices fluctuate with uncertain demand. An optimization model is established aiming at minimizing expected loss. By adopting price interval partition, an approximate solution is derived. The convergence and existence of the solution are theoretically proved, and the solution algorithm is given in the case of finite samples. Numerical experiments are carried out showing that the expected losses caused by price fluctuation is much more lower through the proposed model as compared to that in traditional newsvendor model. The mean value of retail prices and the deviation of demand have some effect on the optimal ordering quantity.

Key words

price fluctuation sales / optimal ordering quantity / newsvendor / demand uncertainty / algorithm

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MENG Zhiqing , ZHENG Minchao. Research on newsvendor model under retail price fluctuation sales strategy. Systems Engineering - Theory & Practice, 2020, 40(10): 2648-2657 https://doi.org/10.12011/1000-6788-2019-0539-10

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Funding

Natural Science Foundation of Zhejiang Province (LY18A010031); National Natural Science Foundation of China (11871434)
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