Hamptonshire Express
Problem #1
Anna Sheen, upon graduating from a Boston-area university with a degree in journalism and operations research, returned to her hometown of Hamptonshire, Pennsylvania, to start a daily newspaper. The Hamptonshire Express emphasized local news which Sheen believed was not adequately covered by big-city newspapers such as the The Philadelphia Inquirer, Pittsburgh PostGazette, and The New York Times.
Sheen daily wrote stories and articles around news and feature material that she gathered from around town, and typeset the newspaper using desktop software and a PC leased from a large
Pittsburgh-area retailer. She estimated her lease cost…show more content… Problem #3
Becoming extremely busy over the next few months, Sheen decided to hand over the retailing portion of her business to another Hamptonshire resident. Ralph Armentrout offered to run the newsstand from 6 a.m. to 10 a.m. and pay the daily rent of $30 to the landlord. He was to estimate expected demand for the Express on the basis of a copy viewed at 10 p.m. the previous night.
Newspapers purchased from Sheen at $0.80 per copy were to be delivered to the newsstand by 6 a.m. the following morning. Armentrout was responsible for any newspapers left unsold at the end of the day.
a.
Assuming h =4, (i.e., Sheen has spent four hours creating the profiles section), what would
Armentrout’s stocking quantity be? To identify the stocking quantity that maximizes
Armentrout’s profits, try varying Q while holding h =4 in the spreadsheet “Hamptonshire
Express Problem #3.”
b.
Why does the optimal stocking quantity differ from the optimal stocking quantity identified in Problem #2? Is the result here consistent with the newsvendor formula?
c.
Now try varying h in spreadsheet “Hamptonshire Express: Problem #3c” (this spreadsheet has optimal newsboy calculation for differentiated channel, i.e. to maximize Ralph’s profit) to see what happens to Sheen’s profit. How does her optimal effort in this question differ from the answer to question 2. Why?
d. How would changing the transfer price from the current
