Satisficing Newsvendor Problem with the Optimism Coefficient

Abstract

In this research note the satisficing newsvendor problem is considered which is defined as the maximization of the probability of exceeding the expected profit multiplied by a positive constant. This constant called optimism coefficient can be chosen by the firm’s management either based on their preference or the market conditions. The coefficient indicates whether there is a low or high optimistic decision maker. For the general demand distribution the results are significantly dependent on this coefficient.

Keywords

• inventory control
• optimization
• newsvendor
• optimism coefficient