Single-Period Stochastic Inventory Planning with Demand Selection

Abstract

This chapter deals with a generalization of the single-period newsvendor problem. We consider a setting in which a decision maker at a single stocking point must determine the stock level for a single product under uncertain demand. In addition to determining the item’s stock level, the decision maker must select a subset from a set of individual demands, each of which is uncertain and follows a particular probability distribution. Assuming normally distributed and independent demand streams results in a class of problems that are strikingly similar to the problems considered in the previous chapter, although the underlying model assumptions are quite different.