Risk tolerance and a retailer's pricing and ordering policies within a newsvendor framework

F.J. Arcelus, Satyendra Kumar and G. Srinivasan

Omega, 2012, vol. 40, issue 2, pages 188-198

Abstract: This paper evaluates the pricing and ordering policies of a retailer, facing a price-dependent stochastic demand, within a newsvendor framework, under different degrees of risk tolerance and under a variety of optimizing objectives. These are (i) maximizing expected profit, for a retailer who may be risk-seeker, risk-averse or risk neutral; (ii) deriving a maximin strategy of maximizing a minimum guaranteed profit and (iii) modeling the probability of exceeding a target profit, as a constraint or as an objective. Some analytical properties and numerical examples illustrate the main features of the models and provide some comparative policy analysis across the model.

Keywords: Supply; chain; management; Inventory; management; Newsvendor; problem; Price-dependent; demand; Degree; of; risk; tolerance; Alternate; optimization; objectives (search for similar items in EconPapers)
Date: 2012
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