Basic problem in applied economics-operations management

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The news-vendor problem is a basic problem in applied economics/operations management whereby one must optimize inventory levels given some uncertain demand and fixed prices. The example below is a simplified example. A news boy purchases papers at 10 cents and sells them at 35 cents. However, he is not allowed to return unsold papers. If his daily demand for papers is known to be uniformly distributed over {1.2,... ,20}. How many papers should he purchase so as to maximize his expected profit?

Reference no: EM131003347

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