Maximizing Revenues of Perishable Assets with a Risk Factor

Youyi Feng and Baichun Xiao
Additional contact information
Youyi Feng: National University of Singapore, Republic of Singapore
Baichun Xiao: Seton Hall University, South Orange, New Jersey and Long Island University, C. W. Post Campus, Brookville, New York

Operations Research, 1999, vol. 47, issue 2, 337-341

Abstract: This article presents a risk-sensitive pricing model to maximize sales revenue of perishable commodities with fixed capacity and finite sales horizon. The model assumes a pair of predetermined prices and the Poisson demand process whose intensity is a decreasing function of price. When optimizing the expected revenue, management takes business risk into account by adding a penalty (or premium) to the objective function. We solve the continuous-time model with the exact solution in closed form. We further analyze the influence of risk attitude on optimal policies.

Keywords: inventory/production; perishable/aging items; maximize revenue of perishable products; decision analysis; risk behavior of risk-averse management; probability: stochastic model applications; dynamic point process (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (23)

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