On the Convexity of Newsvendor Games

International Journal of Production Economics, Vol. 133, pp. 35–42, 2011

CentER Discussion paper Series No. 2005-103

38 Pages Posted: 5 Jan 2005 Last revised: 6 Mar 2012

See all articles by Ulas Ozen

Ulas Ozen

Ozyegin University / Faculty of Business

Henk Norde

Tilburg University - Center For Economic Research; Tilburg University - Department of Econometrics & Operations Research

Marco Slikker

Eindhoven University of Technology (TUE) - School of Industrial Engineering

Date Written: August 1, 2005

Abstract

This study considers a simple newsvendor situation that consists of n retailers, all selling the same item with common purchasing costs and common selling prices. Groups of retailers might increase their expected joint profit by inventory centralization, which means that they make a joint order to satisfy total future demand. The resulting newsvendor games are shown to have non-empty cores in the literature. This study investigates convexity of newsvendor games. We focus our analysis on the class of newsvendor games with independent symmetric unimodal demand distributions after providing several examples outside this class that are not convex. Several interesting subclasses, containing convex games only, are identified. Additionally, we illustrate that these results can not be extended to all games in this class.

Keywords: game theory, inventory centralization, newsvendor, convexity

JEL Classification: C71

Suggested Citation

Ozen, Ulas and Norde, Henk W. and Slikker, Marco, On the Convexity of Newsvendor Games (August 1, 2005). International Journal of Production Economics, Vol. 133, pp. 35–42, 2011, CentER Discussion paper Series No. 2005-103, Available at SSRN: https://ssrn.com/abstract=642401 or http://dx.doi.org/10.2139/ssrn.642401

Ulas Ozen

Ozyegin University / Faculty of Business ( email )

Henk W. Norde (Contact Author)

Tilburg University - Center For Economic Research ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 3245 (Phone)

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands

Marco Slikker

Eindhoven University of Technology (TUE) - School of Industrial Engineering ( email )

P.O. Box 513
5600 MB Eindhoven
Netherlands

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