A risk-averse newsvendor model under the CVaR criterion

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)1040-1044
Journal / PublicationOperations Research
Volume57
Issue number4
StatePublished - Jul 2009
Externally publishedYes

Abstract

The classical risk-neutral newsvendor problem is to decide the order quantity that maximizes the one-period expected profit. In this note, we consider a risk-averse newsvendor with stochastic price-dependent demand. We adopt Conditional Value-at-Risk (CVaR), a risk measure commonly used in finance, as the decision criterion. The aim of our study is to investigate the optimal pricing and ordering decisions in such a setting. For both additive and multiplicative demand models, we provide sufficient conditions for the uniqueness and existence of the optimal policy. Comparative statics show the monotonicity properties and other characteristics of the optimal pricing and ordering decisions. We also compare our results with those of the newsvendor with a risk-neutral attitude and a general utility function. © 2009 INFORMS.

Research Area(s)

  • Inventory, Marketing, Perishable/aging items, Pricing, Risk

Citation Format(s)

A risk-averse newsvendor model under the CVaR criterion. / Chen, Youhua; Xu, Minghui; Zhang, Zhe George.

In: Operations Research, Vol. 57, No. 4, 07.2009, p. 1040-1044.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review