Operations, Information and Decisions Papers

Document Type

Journal Article

Date of this Version

1-2011

Publication Source

Operations Research

Volume

59

Issue

1

Start Page

254

Last Page

261

DOI

10.1287/opre.1100.0858

Abstract

We generalize analysis of competition among newsvendors to a setting in which competitors possess asymmetric information about future demand realizations, and this information is limited to knowledge of the support of demand distribution. In such a setting, traditional expectation-based optimization criteria are not adequate, and therefore we focus on the alternative criterion used in the robust optimization literature: the absolute regret minimization. We show existence and derive closed-form expressions for the robust optimization Nash equilibrium solution for a game with an arbitrary number of players. This solution allows us to gain insight into the nature of robust asymmetric newsvendor competition. We show that the competitive solution in the presence of information asymmetry is an intuitive extension of the robust solution for the monopolistic newsvendor problem, which allows us to distill the impact of both competition and information asymmetry. In addition, we show that, contrary to the intuition, a competing newsvendor does not necessarily benefit from having better information about its own demand distribution than its competitor has.

Keywords

robust optimization, newsvendor competition, absolute regret, asymmetric information, robust optimization equilibrium

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Date Posted: 27 November 2017

This document has been peer reviewed.