The Newsvendor's Truck

Professor Paul Zipkin

ABSTRACT

The newsvendor has finally saved enough money to buy a truck. Now s/he can buy newspapers in one place and sell them elsewhere. The trip takes time, however. Although all demand occurs at one time and place, at the end of the trip, the newsvendor gets information about the demand during the trip. Along the way, using this information, s/he can choose to discard some of the newspapers. Thus, s/he now faces multiple, sequential decisions. We formulate the problem as a dynamic program, demonstrate some structural properties of the solution, and discuss computational issues.