Advertisingisveryimportantforthenewsboyproblembecausetheshelf-lifeofthenewsboyproductis
shortandadvertisingmayincreasesalestoavoidoverstocking.Inthispaper,modelstostudytheeffectof
advertisingaredevelopedforthedistribution-freenewsboyproblemwhereonlythemeanandvariance
of thedemandareknown.Asin KhoujaandRobbins(2003), itisassumedthatthemeandemandisan
increasingandconcavefunctionofadvertisingexpenditure.Threecasesareconsidered:(1)demandhas
constantvariance,(2)demandhasconstantcoefficientofvariation,and(3)demandhasanincreasing
coefficientofvariation.Thispaperprovidesclosed-formsolutionsorstepstosolvetheproblem.
Numericalresultsofthemodelarealsocomparedwiththosefromotherpapers.Theeffectsofmodel
parametersonoptimalexpenditureonadvertising,optimalorderquantity,andthelowerboundon
expectedprofitarederivedordiscussed.
Advertisingisveryimportantforthenewsboyproblembecausetheshelf-lifeofthenewsboyproductisshortandadvertisingmayincreasesalestoavoidoverstocking.Inthispaper,modelstostudytheeffectofadvertisingaredevelopedforthedistribution-freenewsboyproblemwhereonlythemeanandvarianceof thedemandareknown.Asin KhoujaandRobbins(2003), itisassumedthatthemeandemandisanincreasingandconcavefunctionofadvertisingexpenditure.Threecasesareconsidered:(1)demandhasconstantvariance,(2)demandhasconstantcoefficientofvariation,and(3)demandhasanincreasingcoefficientofvariation.Thispaperprovidesclosed-formsolutionsorstepstosolvetheproblem.Numericalresultsofthemodelarealsocomparedwiththosefromotherpapers.Theeffectsofmodelparametersonoptimalexpenditureonadvertising,optimalorderquantity,andthelowerboundonexpectedprofitarederivedordiscussed.
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