The newsvendor problem under multiplicative background risk

Benoît Sévi

European Journal of Operational Research, 2010, vol. 200, issue 3, pages 918-923

Abstract: This note studies the single-period newsvendor problem when the newsvendor faces a multiplicative neutral independent background risk in an expected utility framework. It is shown that multiplicative risk vulnerability is a sufficient condition to guarantee a decrease in the optimal order. A weaker sufficient condition which has more interpretability is also provided and discussed. This result sheds light on situations where exchange, tax or inflation rates risks, which apply multiplicatively to the final wealth, are at work.

Keywords: Newsvendor; problem; Multiplicative; background; risk; Multiplicative; risk; vulnerability; Derived; utility; function; Expected; utility (search for similar items in EconPapers)
Date: 2010

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Persistent link: http://EconPapers.repec.org/RePEc:eee:ejores:v:200:y:2010:i:3:p:918-923

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European Journal of Operational Research is edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

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