Mean-variance analysis of the newsvendor model with stockout cost

Jun Wu, Jian Li, Shouyang Wang and T.C.E. Cheng

Omega, 2009, vol. 37, issue 3, 724-730

Abstract: We study the risk-averse newsvendor model with a mean-variance objective function. We show that stockout cost has a significant impact on the newsvendor's optimal ordering decisions. In particular, with stockout cost, the risk-averse newsvendor does not necessarily order less than the risk-neutral newsvendor. We illustrate this finding analytically for the case where the demand follows the power distribution.

Keywords: Supply; chain; Newsvendor; problem; Mean-variance; Stockout; cost (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (59)

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