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HRABEC, D. HAUGEN, K. POPELA, P.
Original Title
The newsvendor problem with advertising: an overview with extensions
Type
journal article in Web of Science
Language
English
Original Abstract
The original generalization of a newsvendor problem is formulated, its theoretical properties are studied, further analysed and illustrated by computational cases. The effect of advertising on sales has been the subject of recent studies as an important aspect in many demand-based problems. Herein, we deal with the newsvendor problem, due to its simple structure, as a suitable tool for illustrating how facets of marketing may affect decision-making concerning operational problems. In the setting presented, the newsvendor is faced with advertising-sensitive stochastic demand, where a demand-related random element comprises an advertising decision of the multiplicative or additive form. We assume that a suitable advertising strategy results in increased sales. Two advertising response functions are considered, these being concave downward and S-shaped. We review and extend the existing results relating to the newsvendor problem with marketing effects, which mostly pertain to the concave function. These are generalized by defining the S-shaped function, and some original insights into the effect of advertising are given. We establish that the optimal advertising expenditure for the multiplicative case is always less than or equal to the optimal amount in the equivalent deterministic model while it is always equal in the additive case. We finally illustrate the results that are obtained by providing numerical examples involving various advertising response functions, as well as management-related interpretations.
Keywords
Newsvendor problem with advertising; Marketing and operation interface; Advertising response function; Stochastic optimization; Decision-making
Authors
HRABEC, D.; HAUGEN, K.; POPELA, P.
Released
1. 10. 2017
Publisher
SPRINGER HEIDELBERG
Location
TIERGARTENSTRASSE 17, D-69121 HEIDELBERG, GERMANY
ISBN
1863-6683
Periodical
Review of Managerial Science
Year of study
11
Number
4
State
Federal Republic of Germany
Pages from
767
Pages to
787
Pages count
21
URL
https://link.springer.com/article/10.1007/s11846-016-0204-1
BibTex
@article{BUT170196, author="Pavel {Popela} and Dušan {Hrabec} and Kjetil Kare {Haugen}", title="The newsvendor problem with advertising: an overview with extensions", journal="Review of Managerial Science", year="2017", volume="11", number="4", pages="767--787", doi="10.1007/s11846-016-0204-1", issn="1863-6683", url="https://link.springer.com/article/10.1007/s11846-016-0204-1" }