A Study on Risk Analysis in the Successive Newspaper-Boy Problem : Approximate Methods Using Geometric Approach

Abstract

In the case of buying and selling commodity succesively such as newspaper-boy problem, the risk of insolvency is not necessarily reduced by duying commodity in a small quantity every time. In this paper we present three approximate methods to minimize the risk of insolvency on the long-term point of view. To generate and analyze these methods the geometric approach is introduced and some examples are illustrated. By comparing with the strict solution using Markov analysis, the characteristic and limintation of these methods are investigated. As a result, these approximate methods are verified to be practical although they will not always give the optimum solution in the stric sence.