The Nelder-Mead-Algorithm (also known as the “Simplex Algorithm” or even as the “Amoeba Algorithm”) is an algorithm for the minimization of non-linear functions in several variables. In contrast to other non-linear minimization methods, it does not require gradient information. This makes it less efficient, but also less prone to divergence problems. In contrast to other methods, it is not necessary for the minimum to be bracketed by the initial guess: the algorithm performs a limited “global” search. (It may still converge to a local, rather than the global extremum, of course.) Finally, the algorithm is fairly simple to implement as a stand-alone routine, which makes it a natural choice for multi-dimensional minimization if function evaluations are not prohibitively expensive.
Imagine a shared resource, such as a compute server. Users can submit jobs to the server. The resource is “free”, in the sense that no costs are imposed on the users. The question is how to best assign and prioritize jobs when multiple users submit jobs simultaneously.
The “Newsvendor Problem” is a classic problem in inventory and supply-chain management: how much product to carry in stock in the face of uncertain demand?
The problem is obviously of interest in its own right, but it is also an archetypical problem, meaning that variations of it arise frequently and in different contexts. It is therefore valuable to know “how to think about” this kind of problem; in particular, since in its simplest form, it has a closed-form, analytic solution.