Hedging Risks in the Loss-Averse Newsvendor Problem with Backlogging

Liu, Xiaoqing; Chan, Felix T. S.; Xu, Xinsheng

doi:10.3390/math7050429

Cited by 5 publications

(3 citation statements)

References 38 publications

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“…Chan and Xu [28] extend their model by considering shortage cost and find that the order quantity may increase when loss aversion or confidence level increases. Liu et al [54] also adopt this utility function to study the newsvendor problem with backlogging. Moreover, Xu et al [26] propose a legacy loss defined either as the loss for excess order or the shortage penalty, and study the newsvendor problem under different objectives.…”

Section: Literature Reviewmentioning

confidence: 99%

Coping with Loss Aversion and Risk Management in the Supply Chain Coordination

et al. 2021

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In this paper, we apply a combined revenue sharing and buyback contract to investigate the channel coordination of a two-echelon supply chain with a loss-averse retailer. Since loss-averse decision makers usually take on more risks, the Conditional Value-at-Risk (CVaR) measure is introduced to hedge against it and the retailer’s objective is to maximize the CVaR of utility. We obtain the retailer’s optimal order quantity under the combined contract. It is shown that there is a unique wholesale price coordinating the supply chain if the retailer’s confidence level is less than a threshold that is independent of contract parameters. Moreover, a complete sensitivity analysis of parameters is carried out. In particular, the retailer’s optimal order quantity and coordinating wholesale price decreases as the loss aversion or confidence level increases, while it increase as the buyback price or sharing coefficient increases. Furthermore, there exists the situation where the combined contract can coordinate the chain even though neither the revenue sharing nor buyback contract can when the contract parameters are constrained.

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Section: Literature Reviewmentioning

confidence: 99%

Coping with Loss Aversion and Risk Management in the Supply Chain Coordination

et al. 2021

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“…As a fundamental and important inventory management problem, the newsvendor models have been extensively reviewed [1][2][3][4][5]. The newsvendor model applies to various decision-making contexts, such as inventory decisions, supply chain contracting and healthcare management.…”

Section: Introductionmentioning

confidence: 99%

Pricing to the Scenario: Price-Setting Newsvendor Models for Innovative Products

Ma¹

2019

Mathematics

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In this paper, we consider a manufacturer who produces and sells a kind of innovative product in the monopoly market environment. Because the life cycle of an innovative product is usually shorter than its procurement lead time, one unique demand quantity (scenario) will occur in the selling season; thus, there is only one chance for the manufacturer to determine both optimal production quantity and optimal sale price. Considering this one-time feature of such a decision problem, a price-setting newsvendor model for innovative products is proposed. Different to the existing price-setting newsvendor models, the proposed models determine the optimal production quantity and sale price based on some specific state (scenario) which is most applicable for the manufacturer. The theoretical analysis provides managerial insights into the manufacturers’ behaviors in a monopoly market of an innovative product, and several phenomena in the luxury goods market are well explained.

show abstract

“…As a fundamental and important inventory management problem, the newsvendor models have been extensively reviewed [1,3,22,24,26]. The newsvendor model applies to various decision making contexts, such as inventory decisions, supply chain contracting and healthcare management.…”

Section: Introductionmentioning

confidence: 99%

Pricing to the Scenario: Price-Setting Newsvendor Models for Innovative Products

Ma¹

2019

Preprint

View full text Add to dashboard Cite

In this paper, we consider a manufacturer who produces and sells a kind of innovative product in the monopoly market environment. Because the life cycle of innovative product is usually shorter than its procurement lead time, one unique demand quantity (scenario) will occur in the selling season, thus there is only one chance for the manufacturer to determine both optimal production quantity and optimal sale price. Considering this one-time feature of such a decision problem, a price-setting newsvendor model for innovative products is proposed. Different to the existing price-setting newsvendor models, the proposed models determine the optimal production quantity and sale price based on some specific state (scenario) which is most applicable for the manufacturer. The theoretical analysis provides managerial insights into the manufacturers’ behaviors in a monopoly market of an innovative product and several phenomena in the luxury goods market are well explained.

show abstract

Hedging Risks in the Loss-Averse Newsvendor Problem with Backlogging

Cited by 5 publications

References 38 publications

Coping with Loss Aversion and Risk Management in the Supply Chain Coordination

Coping with Loss Aversion and Risk Management in the Supply Chain Coordination

Pricing to the Scenario: Price-Setting Newsvendor Models for Innovative Products

Pricing to the Scenario: Price-Setting Newsvendor Models for Innovative Products

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