The distribution free newsboy problem with partial information

Abstract

We present a new ordering rule for the newsboy problem where besides the mean and variance of demand, the probability that the demand assumes the value zero is known. We derive a lower bound for the expected profit over the set of distributions with given parameters and construct a distribution which achieves the bound. We apply our analysis to an M/G/1 queue with server vacations, which is the base model for many production-inventory systems.