Product Segmentation Newsvendor Problems: A Robust Learning Approach

• URL: http://arxiv.org/abs/2207.03801v1
• Date: Fri, 8 Jul 2022 10:13:10 GMT
• Title: Product Segmentation Newsvendor Problems: A Robust Learning Approach
• Authors: Xiaoli Yan, Hui Yu, Jiawen Li, Frank Youhua Chen
• Abstract summary: Product segmentation newsvendor problem is a new variant of the newsvendor problem. We propose a new paradigm termed robust learning to increase the attractiveness of robust policies.
• Score: 6.346881818701668
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: We propose and analyze a product segmentation newsvendor problem, which generalizes the phenomenon of segmentation sales of a class of perishable items. The product segmentation newsvendor problem is a new variant of the newsvendor problem, reflecting that sellers maximize profits by determining the inventory of the whole item in the context of uncertain demand for sub-items. We derive the closed-form robust ordering decision by assuming that the means and covariance matrix of stochastic demand are available but not the distributions. However, robust approaches that always trade-off in the worst-case demand scenario face a concern in solution conservatism; thus, the traditional robust schemes offer unsatisfactory. In this paper, we integrate robust and deep reinforcement learning (DRL) techniques and propose a new paradigm termed robust learning to increase the attractiveness of robust policies. Notably, we take the robust decision as human domain knowledge and implement it into the training process of DRL by designing a full-process human-machine collaborative mechanism of teaching experience, normative decision, and regularization return. Simulation results confirm that our approach effectively improves robust performance and can generalize to various problems that require robust but less conservative solutions. Simultaneously, fewer training episodes, increased training stability, and interpretability of behavior may have the opportunity to facilitate the deployment of DRL algorithms in operational practice. Furthermore, the successful attempt of RLDQN to solve the 1000-dimensional demand scenarios reveals that the algorithm provides a path to solve complex operational problems through human-machine collaboration and may have potential significance for solving other complex operational management problems.

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