The price of information: inventory management with limited information about demand

An extended abstract of a 2005 winner of the MSOM Society Student Paper Competition. In this paper, we study the newsvendor problem with limited information about the demand distribution. In particular, we derive robust order quantities that minimize the maximum regret, defined as the opportunity cost from not acting optimally, had we had full information about the demand distribution. In addition, we quantify the value of additional information and highlight that knowing that the demand distribution has a regular shape is in general more valuable than knowing its mean and variance.