How Robust is a Newsboy Model ?

Pierre L. Douillet, Besoa Rabenasolo
Laboratoire GEMTEX
École Nationale Supérieure des Arts et Industries Textiles
9, rue de l'Ermitage - 59056 Roubaix, France
Phone: +33 320 258 947, Fax: +33 320 248 406
E-mail: pierre.douillet@ensait.fr, besoa.rabenasolo@ensait.fr

Abstract:

What is the BEST decision a merchant can make when he has to choose what quantity of a given good he will buy today for selling tomorrow? Obviously, the answer depends on the knowledge he has upon the future trends of the market. When expressing this knowledge by a probability distribution, many assumptions are often introduced that are not founded on an actual knowledge, but only on computational facilities.

In fact, the knowledge we ever can have upon the probability distribution of the future demand is far lower than the limited knowledge we can have over the future demand itself. Therefore it is interesting to investigate how robust are the ``hints for an optimal order quantity'' we can extract from what we really know upon the future demand.

This robustness will be studied using the well known newsboy problem.