A portfolio approach to multi-product newsboy problem with budget constraint

Bin Zhang, Zhongsheng Hua
2010 Computers & industrial engineering  
This paper investigates a portfolio approach to multi-product newsboy problem with budget constraint, in which the procurement strategy for each newsboy product is designed as portfolio contract. A portfolio contract consists of a fixed-price contract and an option contract. We model the problem as a profit-maximization model, and propose an efficient solution procedure after investigating the structural properties of the model. We conduct numerical studies to show the efficiency of the
more » ... solution procedure, and to compare three models with different procurement contracts, i.e., fixed-price contract, option contract, and portfolio contract. Numerical results are shown to demonstrate the advantage of the portfolio model, and sensitivity analysis is provided for obtaining some managerial insights.
doi:10.1016/j.cie.2010.02.007 fatcat:rmlbriem2vdrna5sj55p7kaiwi