Abstract
We model a risk-averse newsvendor's decision-making behavior with some commonly used classes of utility functions within the expected utility theory (EUT) framework. Under fairly general conditions of EUT, we show that a risk-averse newsvendor will order less than an arbitrarily small quantity as selling price gets larger if price is higher than a threshold value, i.e., the optimal order quantity decreases as the selling price increases.
Original language | English (US) |
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Pages (from-to) | 544-553 |
Number of pages | 10 |
Journal | European Journal of Operational Research |
Volume | 196 |
Issue number | 2 |
DOIs | |
State | Published - Jul 16 2009 |
Externally published | Yes |
Keywords
- Expected utility theory
- Newsvendor model
- Risk aversion
ASJC Scopus subject areas
- General Computer Science
- Modeling and Simulation
- Management Science and Operations Research
- Information Systems and Management