I was thinking about when Minimizing Expected Cost would not be equal to Maximizing Expected Profit. The first thing that came to mind was a situation where there is a bonus given if a certain amount of product is sold.
Using the Newsboy Model the situation would be as follows:
If the Newsboy sells a certain amount of papers, the newspaper gives him a $20 bonus.
This bonus could be incorporated into the Revenue equation and would effect Expected Profit, but there is no added cost incurred for receiving the extra revenue (since it is based on papers sold and not papers bought), so it does not effect Expected Cost.
That is the only situation I could think of where Minimizing Expected Cost is not equal to Maximizing Expected Profit.
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2 comments:
cost:c*Q+A
profit:(p-c)*Q-A
I think it is always equal. Is that right?
Today when i review the note, i went back to the 3rd notes.
It says that when there is lost sales, minimizing cost is not equal to maximizing revenue.
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