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

Butters, R., On Demand Uncertainty in the Newsvendor Model (September 28, 2019). Kelley School of Business Research Paper, 20-53, Available at SSRN: https://ssrn.com/abstract=3461096 or http://dx.doi.org/10.2139/ssrn.3461096

R. Butters (Contact Author)

Indiana University ( email )

1309 E. Tenth St.
Bloomington, IN 47405
United States

HOME PAGE: http://https://kelley.iu.edu/BEPP/faculty/page14113.cfm?ID=46947

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