Loss-averse newsvendor model with two ordering opportunities and market information updating

Lijun Ma, Yingxue Zhao, Weili Xue, T.C.E. Cheng and Houmin Yan

International Journal of Production Economics, 2012, vol. 140, issue 2, 912-921

Abstract: A fashion supply chain characterized by a long lead time and a short selling season is considered in this paper. Facing demand uncertainty, the risk averse retailer has two opportunities to make order decisions before the demand is realized. The risk aversion is modelled as a penalty to the decision maker (the retailer) if a target profit is not attained. We derive the retailer's optimal ordering decisions and analyze the monotonicity behaviours of the critical market signal, the optimal first-stage order quantity, and the optimal expected payoff with respect to the penalty coefficient. We also examine the impact of demand forecast quality on the retailer's decisions and extend the study to the case where order cancellation is allowed.

Keywords: Supply chain management; Quick response; Information update; Loss averse (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:140:y:2012:i:2:p:912-921

DOI: 10.1016/j.ijpe.2012.07.012

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