Risk in inventory models: The case of the newsboy problem—optimality conditions

A recent article in this journal employs the capital-asset pricing model for the analysis of the newsboy problem and shows how the covariance risk affects the optimal inventory policy. The purpose of this paper is to sharpen the optimality conditions given by the article and hence to provide a simple method for finding the solution. Under reasonable assumptions, this paper shows that the optimal ordering policy can be described by a single equation, regardless of the sign of the covariance term.