Mixed contracts for the newsvendor problem with real options

In this paper we consider the newsvendor model with real options. We consider a mixed contract where the retailer can order a combination of q units subject to the conditions in a classical newsvendor contract and Q real options on the same items. We provide a closed form solution to this mixed contract when the demand is discrete and study some of its properties. We also offer an explicit solution for the continuous case. In particular we demonstrate that a mixed contract may be superior to a real option contract when a manufacturer has a bound on how much variance she is willing to accept.Newsvendor model; real options; discrete demand; mixed contract

A maximum entropy approach to the newsvendor problem with partial information

In this paper, we consider the newsvendor model under partial information, i.e., where the demand distribution D is partly unknown. We focus on the classical case where the retailer only knows the expectation and variance of D. The standard approach is then to determine the order quantity using conservative rules such as minimax regret or Scarf's rule. We compute instead the most likely demand distribution in the sense of maximum entropy. We then compare the performance of the maximum entropy approach with minimax regret and Scarf's rule on large samples of randomly drawn demand distributions. We show that the average performance of the maximum entropy approach is considerably better than either alternative, and more surprisingly, that it is in most cases a better hedge against bad results.Newsvendor model; entropy; partial information

Monitoring international migration flows in Europe. Towards a statistical data base combining data from different sources

The paper reviews techniques developed in demography, geography and statistics that are useful for bridging the gap between available data on international migration flows and the information required for policy making and research. The basic idea of the paper is as follows: to establish a coherent and consistent data base that contains sufficiently detailed, up-to-date and accurate information, data from several sources should be combined. That raises issues of definition and measurement, and of how to combine data from different origins properly. The issues may be tackled more easily if the statistics that are being compiled are viewed as different outcomes or manifestations of underlying stochastic processes governing migration. The link between the processes and their outcomes is described by models, the parameters of which must be estimated from the available data. That may be done within the context of socio-demographic accounting. The paper discusses the experience of the U.S. Bureau of the Census in combining migration data from several sources. It also summarizes the many efforts in Europe to establish a coherent and consistent data base on international migration. The paper was written at IIASA. It is part of the Migration Estimation Study, which is a collaborative IIASA-University of Groningen project, funded by the Netherlands Organization for Scientific Research (NWO). The project aims at developing techniques to obtain improved estimates of international migration flows by country of origin and country of destination

Cost allocation in collaborative forest transportation

Transportation planning is an important part of the supply chain or wood flow chain in forestry. There are often several forest companies operating in the same region and collaboration between two or more companies is rare. However, there is an increasing interest in collaborative planning as the potential savings are large, often in the range 5-15%. There are several issues to agree on before such collaborative planning can be used in practice. A key question is how the total cost or savings should be distributed among the participants. In this paper, we study a large application in southern Sweden with eight forest companies involved in a collaboration. We investigate a number of sharing mechanisms based on economic models including Shapley value, the nucleolus, separable and non-separable costs, shadow prices and volume weights. We also propose a new allocation method, with the aim that the participants relative profits are as equal as possible. We use two planning models, the first is based on direct flows between supply and demand points and the second includes backhauling. We also study how several time periods and geographical distribution of the supply and demand nodes affect the solutions. Better planning within each company can save about 5% and collaboration can increase this about another 9% to a total of 14%. The proposed allocation method is shown to be a practical approach to share the overall cost/savings.Transportation OR in natural resources Supply chain management Logistics Economics Group decisions and negotiations Linear programming Backhauling