Would a risk-averse newsvendor order less at a higher selling price?

Charles X. Wang, Scott Webster, Nallan C. Suresh

Research output: Contribution to journalArticle

87 Scopus citations

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 languageEnglish (US)
Pages (from-to)544-553
Number of pages10
JournalEuropean Journal of Operational Research
Volume196
Issue number2
DOIs
StatePublished - Jul 16 2009
Externally publishedYes

Keywords

  • Expected utility theory
  • Newsvendor model
  • Risk aversion

ASJC Scopus subject areas

  • Computer Science(all)
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

Fingerprint Dive into the research topics of 'Would a risk-averse newsvendor order less at a higher selling price?'. Together they form a unique fingerprint.

  • Cite this