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Newsvendor model with Endogenous Randomness, i.e., our decision
variables affect the distribution of the random variables.
Stage 0: Choose parameters of the distribution.
Stage 1 beginning: Generate a standard random variable.
Stage 1 end: Transform standard r.v. to desired r.v. with chosen parameters.
This specific case:
We can invest in advertising to increase mean demand.
We can invest in forecasting to decrease standard deviation in demand.
So our decisions in stage 0 affect the distribution of demand seen in stage 1;