Vaagen, Hajnalka and Wallace, Stein W (2008) Product variety arising from hedging in the fashion supply chains. International Journal of Production Economics, 114 (2). pp. 431-455. ISSN 0925-5273Full text not available from this repository.
Consider a well-defined fashion apparel category, where the variants are distinguished by style and colour, and are subject to two equally likely states of the world: State1 when some variants become popular and others unpopular, and State2 when the reverse takes place. We analyse the optimal portfolio and variety arising from hedging against uncertainty triggered by the states, by integrating the Markowitz and the Newsboy models, while carefully considering demand correlations. We show that due to the complex structure of the uncertainty, building hedging portfolios with competing items is necessary for optimality. We also show how mis-specifying the distributions can lead to very bad trade-offs between risk and expected profit, caused by a lack of proper hedging.
|Journal or Publication Title:||International Journal of Production Economics|
|Uncontrolled Keywords:||Fashion ; Newsboy ; Mean variance ; Hedging ; Correlations ; Bi-modal distributions|
|Departments:||Lancaster University Management School > Management Science|
|Deposited On:||11 Jul 2011 19:31|
|Last Modified:||29 Mar 2017 04:06|
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