On the Optimality Conditions of a Price-Setting Newsvendor Problem

We analyze a price-setting news-vendor problem with an additive – multiplicative demand. We show that the uni-modality of the news-vendor profit function holds when the underlying random term has an increasing failure rate and the demand functions satisfy certain concavity conditions. Furthermore, we show that the optimal price decreases in the order quantity. Finally, we compare our optimality conditions with those existing in the literature.

Keywords: Inventory Control, Price-Setting News-vendor, Uni-modality, Elasticity

JEL Classification: C61, M11, M20, C40, C10, D83

Suggested Citation: Suggested Citation

Luo, Sirong and Sethi, Suresh and Shi, Ruixia, On the Optimality Conditions of a Price-Setting Newsvendor Problem (2016). Operations Research Letters, 44, 697-701, 2016, Available at SSRN: https://ssrn.com/abstract=3565231 or http://dx.doi.org/10.2139/ssrn.3565231