Issue: 2022/Vol.32/No.3, Pages 49-64
BARTER EXCHANGE AS THE WAY TO DEAL WITH EXCESS INVENTORY: NEWSVENDOR PROBLEM WITH MULTIPLICATIVE DEMAND
Milena Bieniek
Cite as: M. Bieniek. Barter exchange as the way to deal with excess inventory: newsvendor problem with multiplicative demand. Operations Research and Decisions 2022: 32(3), 49-64. DOI 10.37190/ord220304
Abstract
Barter exchange has been growing in popularity during the coronavirus pandemic. This article considers bartering introduced to the newsvendor model with multiplicative demand. The objective of the model is to specify the order quantity and retail price to maximize the expected profit. We distinguish cases with the co-movement of prices of exchanged products and without it. In the first case, we calculate a precise optimal solution to the problem. In the latter case, we prove the existence of an optimal solution and give the conditions under which it is unique. We examine the sensitivity analysis of the results which is illustrated in numerical examples. The analysis revealed that the greater the commission, the lower the optimal profit. We make a conclusion that barter exchange can help the retailer to improve the profit.
Keywords: barter exchange, inventory, newsvendor, pricing, multiplicative demand
Received: 11 January 2022 Accepted: 8 July 2022
Published online: 22 November 2022