Volume 38, Issue 3 (May 2010)
The Information Value Applying to the Newsboy Model with the Cutoff Transaction Size
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.