Optimal Inventory Decisions in a Multi-period News Vendor Problem with Partially Observed Markovian Supply Capacities

European Journal of Operational Research, Forthcoming

34 Pages Posted: 2 Jun 2008 Last revised: 10 Jul 2009

See all articles by Haifeng Wang

Haifeng Wang

Tsinghua University - Department of Automation; The Chinese University of Hong Kong - Department of Systems Engineering & Engineering Management

Houmin Yan

The Chinese University of Hong Kong (CUHK) - Department of Systems Engineering & Engineering Management

Date Written: June 2, 2008

Abstract

This paper considers a multi-period news-vendor problem with partially observed supply-capacity information which evolves as a Markovian Process. The supply capacity is fully observed by the buyer when the capacity is smaller than the buyer's ordering quantity. Otherwise, the buyer knows that the current-period supply capacity is greater than its ordering quantity. Based on these two observations, the buyer updates the future supply-capacity forecasting accordingly. With a dynamic programming formulation, we prove the existence of an optimal ordering policy. We also prove that the optimal order quantity is greater than the myopic order quantity.

Keywords: Partial information, Markovian process, inventory planning and control

Suggested Citation

Wang, Haifeng and Yan, Houmin, Optimal Inventory Decisions in a Multi-period News Vendor Problem with Partially Observed Markovian Supply Capacities (June 2, 2008). European Journal of Operational Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1139764

Haifeng Wang (Contact Author)

Tsinghua University - Department of Automation ( email )

Beijing, 100084
China

The Chinese University of Hong Kong - Department of Systems Engineering & Engineering Management ( email )

Hong Kong

Houmin Yan

The Chinese University of Hong Kong (CUHK) - Department of Systems Engineering & Engineering Management ( email )

Shatin, New Territories
Hong Kong

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