The newsboy problem with inventory financing and multi-phases clearance prices

Abstract

There are many extensions about newsboy problem in recent researches. They have been applied for the newsboy-type products like seasonal products, fashion products and holiday products etc. But only one salvage price for the excess inventory is considered in most literatures, one extension that adopts a multi-phases clearance prices policy has approved better profit for the retailer. On the other hand, not until recent years has the retailer's limited initial cash been taken into consideration with the inventory financing. Real world settings, especially the fashion products and holiday products, often involve a combined condition of adopting a multi-phases clearance prices policy and financing the initial purchasing plan. In this paper, we formulate and solve the Newsboy problem with these two conditions and show how a retailer decides the purchase order quantity in order to maximize his profit.