A robust approach for newsvendor problem with the alternative product under price and ordering quantity competitions

Abstract

This paper considers a robust approach for an inventory model considering standard and high qualities of a product under price and quantity competitions. In the case the competitive store sells a standard product, another store must decide the purchase volumes, prices and ordering quantities of standard and high quality products in order to manage a loss risk as well as maximize the total profit. In this paper, a robust-based mathematical programming problem of the proposed model is proposed considering these conditions and uncertainty of consumer demands. Furthermore, in order to obtain the optimal prices and ordering quantities, a scenario-based approach is developed.