The optimal order decisions of a risk-averse newsvendor under backlogging

Jianghua Zhang, Felix T. S. Chan and Xinsheng Xu ()
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Jianghua Zhang: Shandong University
Felix T. S. Chan: The Hong Kong Polytechnic University
Xinsheng Xu: Binzhou University

Annals of Operations Research, 2023, vol. 329, issue 1, No 8, 225-247

Abstract: Abstract In this paper, we are concerned with the optimal order quantities for a risk-averse newsvendor with backlogging, where it is assumed that all or part of the unsatisfied demands can be fullfilled by backordering. The optimal order quantities are derived under the famous conditional value-at-risk (CVaR) criterion and mean-CVaR criterion on controlling the profit loss due to the uncertainty of market demands. With the optimal order quantities to the proposed models, several important monotone properties are obtained and their relationships with the existing results are discussed. Moreover, it is shown in this paper that low risk means low expected profit while high expected profit comes with high risk. Finally, we present some managerial insights for the risk-averse newsvendor model under backlogging.

Keywords: Logistics; Risk management; Newsvendor model; Conditional value-at-risk; Backordering; Optimal order quantity (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10479-020-03636-2

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