Risk in Inventory Models: The Case of the Newsboy Problem - Optimality Conditions

The Journal of the Operational Research Society, Vol. 41, No. 2, pp. 173-176, February 1990

Posted: 15 Dec 2009

See all articles by Kee H. Chung

Kee H. Chung

State University of New York at Buffalo - School of Management

Date Written: December, 11 2009

Abstract

A recent article in this Journal employs the capital-asset pricing model for the analysis of the newsboy problem and shows how the covariance risk affects the optimal inventory policy. The purpose of this paper is to sharpen the optimality conditions given by the article and hence to provide a simple method for finding the solution. Under reasonable assumptions, this paper shows that the optimal ordering policy can be described by a single equation, regardless of the sign of the covariance term.

Keywords: finance, inventory, risk

JEL Classification: G12

Suggested Citation

Chung, Kee H., Risk in Inventory Models: The Case of the Newsboy Problem - Optimality Conditions (December, 11 2009). The Journal of the Operational Research Society, Vol. 41, No. 2, pp. 173-176, February 1990, Available at SSRN: https://ssrn.com/abstract=1522132

Kee H. Chung (Contact Author)

State University of New York at Buffalo - School of Management ( email )

Buffalo, NY 14260
United States
716-645-3262 (Phone)
716-645-3823 (Fax)

HOME PAGE: http://mgt.buffalo.edu/faculty/academic-departments/finance/faculty/kee-chung.html

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