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University of Pennsylvania

Absolute regret

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Technical Note—Robust Newsvendor Competition Under Asymmetric Information, Houyuan Jiang, Serguei Netessine, Sergei Savin Jan 2011

Technical Note—Robust Newsvendor Competition Under Asymmetric Information, Houyuan Jiang, Serguei Netessine, Sergei Savin

Operations, Information and Decisions Papers

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 ...