A newsvendor has a contract for delivering D newspapers per day to the office of a large organization; daily demand is fixed and guaranteed. Which of the following is true? a. The optimal order quantity is D times the critical fractile b. The critical fractile is exactly 0 c. The optimal order quantity is D for any critical fractile d. The critical fractile is exactly 1

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Business

Stout

11 December, 06:42

A newsvendor has a contract for delivering D newspapers per day to the office of a large organization; daily demand is fixed and guaranteed. Which of the following is true? a. The optimal order quantity is D times the critical fractile b. The critical fractile is exactly 0 c. The optimal order quantity is D for any critical fractile d. The critical fractile is exactly 1

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Myla Moran · Answer 1

Option c is correct (The optimal order quantity is D for any critical fractile)

Explanation:

Option c is correct (The optimal order quantity is D for any critical fractile)

Critical fractile:

It follows and incorporate the change in the demand. This is mostly use by newsvendors who have to make decision; how many copies have to be made so that if demand changes, they can fulfill the requirement.

In our case critical fractile can be of any value because it is not going to affect the ordering decision. Moreover underage or overage is not a problem.