Some Lost Sale Recapture Models in the Newsvendor Framework

This book presents the analysis of a single-period decision of a retailer facing uncertain and price-dependent demand in the situation of trying to recapture lost sales. The typical modelling of the problem in a newsvendor framework assumes the lost sales to be lost once and for all. However, in reality, there may be an opportunity to backlog the lost sales, by offering some incentive for waiting, but the retailer's procurement price may be higher to compensate for the likely higher cost of the emergency purchase. The backlog fill rate is modelled as a function of the proportion of the rebate to the price. The book models the fill rate functions in two different ways. Then the retailer has to decide ahead of the realization of the demand, the quantity to be ordered, the price and the rebate to be offered for backlogged sales that will maximize its expected profit. This book will be useful to researchers working in the area of inventory modelling and an interface of marketing science. Lot of examples and sensitivity analysis done will be helpful to build simulation models to capture the fill rate behavior and the pricing and order quantity mechanisms that raise the profits.