Mathematical Modeling for Risk Averse Firm Facing Loss Averse Customer’s Stochastic Uncertainty

Seungbeom Kim, Jinpyo Lee and Minjae Park

Mathematical Problems in Engineering, 2017, vol. 2017, 1-9

Abstract:

To optimize the firm’s profit during a finite planning horizon, a dynamic programming model is used to make joint pricing and inventory replenishment decision assuming that customers are loss averse and the firm is risk averse. We model the loss averse customer’s demand using the multinomial choice model. In this choice model, we consider the acquisition and transition utilities widely used by a mental accounting theory which also incorporate the reference price and actual price. Then, we show that there is an optimal inventory policy which is base-stock policy depending on the accumulated wealth in each period.

Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
http://downloads.hindawi.com/journals/MPE/2017/6810415.pdf (application/pdf)
http://downloads.hindawi.com/journals/MPE/2017/6810415.xml (text/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:6810415

DOI: 10.1155/2017/6810415

Access Statistics for this article

More articles in Mathematical Problems in Engineering from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().