 Risk shaping in production planning problem with pricing under random yieldSaman Eskandarzadeh, Kourosh Eshghi and Mohsen Bahramgiri European Journal of Operational Research, 2016, vol. 253, issue 1, 108-120 Abstract: In this paper, we address a basic production planning problem with price dependent demand and stochastic yield of production. We use price and target quantity as decision variables to control the risk of low production yield. The value of risk control becomes more important especially for products with short life cycle where high losses are unbearable in the short run. In this cases, optimization of a solely scalar function of profit is not sufficient to control the risk. We apply Conditional Value at Risk (CVaR) measure to model the risk preferences of the producer. The producer is interested in shaping the risk by bounding from below the means of α-tail distributions of profit for different values of α. The resulting model is nonconvex. We propose an efficient solution algorithm and present a sufficient optimality condition. Keywords: Risk management; Coherent risk measures; Conditional value at risk; Random yield; Risk shaping (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:253:y:2016:i:1:p:108-120 DOI: 10.1016/j.ejor.2016.02.032 Access Statistics for this article European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati More articles in European Journal of Operational Research from Elsevier |
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