ISSN: 1945-7553
CODEN: JTEVAB
Published Online: 8 December 2009
Page Count: 6

The Information Value Applying to the Newsboy Model with the Cutoff Transaction Size

Tsai, Hui-Yin
Dept. of Business Administration, Yuanpei Univ., Hsin-Chu,

Lin, Chin-Tsai
Dept. of Business Administration, Yuanpei Univ., Hsin-Chu,

(Received 13 May 2009; accepted 24 October 2009)

Abstract

In this investigation, we adopt the perspective of a retailer and incorporate information flow between a retailer and customers. Meanwhile, the retailer can gain for the complete information about the state of customers’ demand from the exporter and pay them in order to make correct decisions and obtain more profits. Hence, precise expressions are derived for the expected total profit with incomplete and complete information of demand to measure the value of information. Moreover, we determine an optimal order-up-to level S and a cutoff transaction size q systematically. Finally, the numerical example is given to illustrate the result derived.

Keywords:
value of information, cutoff transaction size, newsboy model, concave function

Paper ID: JTE102493
DOI: 10.1520/JTE102493
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