Product selection for newsboy-type products with normal demands and unequal costs

Rung Hung Su, W.l. Pearn

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

In this paper, we consider two newsboy-type products with unequal prices and costs. Both demands are independent and follow normal distributions with unknown parameters μ and σ. We study the product selection problem which deals with comparing two products and selecting the one that has a significantly higher profitability, in which the profitability is defined to the probability of achieving a target profit under the optimal ordering policy. The statistical hypothesis testing methodology is performed to tackle this selection problem. Critical value of the test is calculated to determine the selection decision. Sample size required for a designated power and confidence level is also investigated. An application example on comparing English-teaching magazines is presented to illustrate the practicality of our approach.

Original languageEnglish
Pages (from-to)214-222
Number of pages9
JournalInternational Journal of Production Economics
Volume132
Issue number2
DOIs
StatePublished - 1 Aug 2011

Keywords

  • Inventory
  • Newsboy
  • Normal demand
  • Product selection

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