We are happy to invite you to this week OR seminar. When: Mon. November 10, 2003, 12:30. Where: Bloomfield 527 Technion. Speaker: Prof. Mordecai Henig. Title: The effect of inventory shortage in a two-newsvendors model Abstract: A key negative consequence of product shortages, beyond the immediate loss of revenue, is the effect on future demand. Unsatisfied customers are likely to shop at the competition next time they need the item. We model such dynamic two-firm scenario, where unsatisfied customers of one firm will try the other firm next time, and vice versa. In each period a certain number of customers are tentatively affiliated with each firm, of whom a random proportion will attempt a purchase, and the firm^Òs stocking decision is based on this number. The general functional equation is formulated and the optimal quantity to order is obtained for a family of proportional demand distributions. In this case there exists Nash equilibrium in pure strategies where each firm orders proportionally to its number of affiliated customers. We argue that the customary use of shortage penalty or service level may distort optimality. Joint work with Yigal Gerchak, Dept. of Industrial Engineering, Tel-Aviv University. --------------------------------------------------------- Technion Math. Net (TECHMATH) Editor: Michael Cwikel Announcement from: Amir Beck