The max–min newsvendor pricing problem under conditional value-at-risk criterion

Wenyou Wang (), Yao Yang () and Sirong Luo ()
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Wenyou Wang: Shanghai University of Finance and Economics
Yao Yang: Shanghai University of Finance and Economics
Sirong Luo: Shanghai University of Finance and Economics

Flexible Services and Manufacturing Journal, 2024, vol. 36, issue 1, No 3, 102 pages

Abstract: Abstract This paper studies a risk-averse newsvendor pricing model with limited demand information under the conditional value-at-risk (CVaR) criterion. The paper uses a max–min approach and the objective is to maximize the lower bound on the CVaR of the loss, i.e., the negative of profit in the worst possible distribution case. The paper analyzes the optimal ordering and pricing decisions under both multiplicative and additive demand models, identifies the optimality conditions of the lower bound on the CVaR of loss, and obtains the implicit solutions for the optimal price and order quantity. Furthermore, the paper analyzes the sensitivity of optimal solutions with respect to the degree of risk aversion.

Keywords: Pricing; Newsvendor model; Max–min method; Unimodal; Conditional value-at-risk (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10696-022-09472-9

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