Halkos, George and Kevork, Ilias (2012): Evaluating alternative estimators for optimal order quantities in the newsvendor model with skewed demand.

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Abstract
This paper considers the classical Newsvendor model, also known as the Newsboy problem, with the demand to be fully observed and to follow in successive inventory cycles one of the Exponential, Rayleigh, and LogNormal distributions. For each distribution, appropriate estimators for the optimal order quantity are considered, and their sampling distributions are derived. Then, through MonteCarlo simulations, we evaluate the performance of corresponding exact and asymptotic confidence intervals for the true optimal order quantity. The case where normality for demand is erroneously assumed is also investigated. Asymptotic confidence intervals produce higher precision, but to attain equality between their actual and nominal confidence level, samples of at least a certain size should be available. This size depends upon the coefficients of variation, skewness and kurtosis. The paper concludes that having available data on the skewed demand for enough inventory cycles enables (i) to trace nonnormality, and (ii) to use the right asymptotic confidence intervals in order the estimates for the optimal order quantity to be valid and precise.
Item Type:  MPRA Paper 

Original Title:  Evaluating alternative estimators for optimal order quantities in the newsvendor model with skewed demand 
Language:  English 
Keywords:  Inventory Control; Newsboy Problem; Skewed Demand; Exact and Asymptotic Confidence Intervals; MonteCarlo Simulations 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C13  Estimation: General M  Business Administration and Business Economics; Marketing; Accounting > M1  Business Administration > M11  Production Management C  Mathematical and Quantitative Methods > C4  Econometric and Statistical Methods: Special Topics > C44  Operations Research; Statistical Decision Theory C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C15  Statistical Simulation Methods: General D  Microeconomics > D2  Production and Organizations > D24  Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity 
Item ID:  36205 
Depositing User:  G.E. Halkos 
Date Deposited:  26. Jan 2012 23:12 
Last Modified:  12. Feb 2013 18:47 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/36205 