Effects of centralization on expected costs in a multi-location newsboy problem¶
Eppen, G. D. (1979). Effects of centralization on expected costs in a multi-location newsboy problem. Management Science, 25(5), 498-501.
Cited by¶
1 citation across 1 artifact.
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Primes¶
- Risk Pooling
- Instead of asking "How can I reduce my exposure?" (individual focus), pooling asks "How can we collectively manage the aggregate?" and "What pool structure minimizes per-unit cost or risk?"—the centralization-vs-decentralization framing Eppen (1979) made precise for multi-location inventory.
This sourceEstablishes the square-root inventory-pooling law: aggregating demand across n locations reduces required safety stock by √n, formalizing the centralization-vs-decentralization trade-off.
- Instead of asking "How can I reduce my exposure?" (individual focus), pooling asks "How can we collectively manage the aggregate?" and "What pool structure minimizes per-unit cost or risk?"—the centralization-vs-decentralization framing Eppen (1979) made precise for multi-location inventory.
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