Authors: Morgan McCormick (mm3237), Brittany Yesner, Daniel Aronson, John Bednarek
To formulate a standard newsvendor problem to determine profit, the function is
The balance of being understocked and losing potential sales with the potential loss from being overstocked can be represented by the critical fractile. This is illustrated by formula where F-1 is the inverses of the cumulative distribution function of R.
Demand for a given day can be represented using a variety of distributions. Most commonly, there are uniform, normal, or lognormal distributions.