Assortment decision in the multi-product News-Vendor Problem with demand substitution

Retailers are confronted to make ordering decisions for a large category of products offered to end consumers. In this paper, we extend the classical mono-product News-Vendor Problem to a multi-product News-Vendor Problem with demand transferring and demand substitution. We focus on the joint determination of optimal product assortment and optimal order quantities. Computational algorithms are presented to solve the problem. We compare the global optimization policy with some other policies used in practice by numerical examples.