Stochastic programming for decentralized newsvendor with transshipment

Nichalin S. Summerfield, Moshe Dror

Research output: Contribution to journalArticlepeer-review

12 Scopus citations


This paper discusses a family of two-stage decentralized inventory problems using a unifying framework (taxonomy) depicted as a multilevel graph. This framework allows us to model and link different problems of competing retailers who independently procure inventory in response to uncertain demand and anticipated inventory decisions of other retailers. In this family of problems, in the ex-post stage, the retailers exercise recourse actions in response to the realized demand and competitors chosen procurement levels. For example, retailers could coordinate inventory transshipment to satisfy shortage with overage based on profit sharing agreements. Our framework provides a unifying parsimonious view using a single methodological prism for a variety of problems. Equally importantly, as recourse options are laid out, our framework clarifies and contributes a modeling connection between problems in a clear taxonomy of models. This unifying perspective explicitly links work that appeared in isolation and offers future research directions.

Original languageEnglish (US)
Pages (from-to)292-303
Number of pages12
JournalInternational Journal of Production Economics
Issue number2
StatePublished - Jun 2012


  • Cooperative and non-cooperative game
  • Inventory management
  • Stochastic programming

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering


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