On Demand Uncertainty in the Newsvendor Model
12 Pages Posted: 22 Oct 2019
Date Written: September 28, 2019
I provide three comparative statics involving the level of demand uncertainty for the newsvendor model, two of which lead to robust predictions. I show that for distributions of demand that are greater in the dispersive order, both the expected (censored) sales and share of inventory sold fall. These monotone comparative statics occur despite the lack of one for the (optimal) inventory choice.
Keywords: demand uncertainty, newsvendor model, dispersive order, inventory, monotone comparative statics, censored demand
JEL Classification: D81, D21, C60
Suggested Citation: Suggested Citation