The risk averse newsvendor problem from rank-dependent expected utility approach

Jiangfeng Li, Weifang Liu, Jinliang Wang and Shunming Zhang ()

International Journal of Operational Research, 2014, vol. 20, issue 3, 262-282

Abstract: This paper examines the single-period newsvendor problem where the risk averse newsvendor with rank-dependent expected utility (RDEU) determines the optimal order of newspapers for sale. Compared with the expected-utility (EU) newsvendor model, the effect of risk averse under RDEU on optimal order quantity is more significant and a closed-form solution is derived for dual-utility (DU) theory. The optimal order for RDEU newsvender is less than that for DU one. It follows that the optimal order for EU newsvender is less than that for expected-profit (EP) one. On the other hand, the optimal order for RDEU newsvender is less than that for EU one. In particular, the optimal order for DU newsvender is less than that for EP one. Effect of changes in risk aversion degree is also explored.

Keywords: risk aversion; risk averse newsvendor problem; rank-dependent expected utility; RDEU; distortion function; optimal orders. (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=62457 (text/html)
Access to full text is restricted to subscribers.

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:ids:ijores:v:20:y:2014:i:3:p:262-282

Access Statistics for this article

More articles in International Journal of Operational Research from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().