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Goodwill hunting and profit sharing: decision-making in a newspaper chain.

Pearson, Mike


Mike Pearson


A generalised equilibrium solution to the stochastic two-echelon newsvendor problem is achievable when formulated in the context of some cooperation and coordination between the primal (retailer) and dual (manufacturer) operators. We build on previous work detailing this equilibrium solution and apply it to the newspaper business. The solution incorporates changes in variability encountered due to promotional activity which extends the efficient frontier. We also consider consequences for profit and goodwill costs of identifying an equilibrium solution when additional income is generated from a source outside of the supply chain, such as advertising. We generalise to the supply chain network where there is some knowledge of demand or supply distributions further up or down the supply chain. We find that the primal–dual formulation and equilibrium solution apply to interactions between components of supply chain networks and illustrate with the transition to the direct distribution of newspapers.


Pearson, M. (2007). Goodwill hunting and profit sharing: decision-making in a newspaper chain. European Journal of Operational Research, 181, 1593-1606.

Journal Article Type Article
Publication Date Sep 16, 2007
Deposit Date Feb 29, 2008
Print ISSN 0377-2217
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 181
Pages 1593-1606
Keywords inventory; newsvendor; supply chain networks; Equilibrium solution; automatic allocation; newspapers;
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