Customer balking behavior in the newsvendor model: Its impact on performance measures and decision under uncertain balking parameters

Abstract

In this paper, we investigate the performance measures of newsvendor model in an environment of customer balking, which occurs when customers are reluctant to buy a product if its available inventory falls below a threshold level. We derive the explicit expression of several performance measures in the newsvendor model with customer balking and also provide those upper or lower bound in the worst demand distribution. In addition, based on some properties associated with customer balking parameters, we suggest a constrained optimization problem to decide order quantity under the circumstance with uncertain balking parameters given as a form of range. We illustrate the concepts developed here through simple numerical examples and conclude with future research topics under the balking situation. (C) 2014 Elsevier B.V. All rights reserved.