Risk-averse decision making in overbooking problem

Xiong, Huachun; Xie, Jinxing; Deng, Xiaoxue

doi:10.1057/jors.2010.130

Cited by 8 publications

(5 citation statements)

References 18 publications

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“…Recent works of Barz and Waldmann (2007), Feng and Xiao (2008) and Xiong et al (2011) are employing expected utility theory, too. Both papers support the application of an exponential utility function to account for risk aversion.…”

Section: Related Workmentioning

confidence: 99%

Risk minimising strategies for revenue management problems with target values

Koenig

Meissner

2016

Journal of the Operational Research Society

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Consider a risk-averse decision maker in the setting of a single-leg dynamic revenue management problem with revenue controlled by limiting capacity for a fixed set of prices. Instead of focussing on maximising the expected revenue, the decision maker has the main objective of minimising the risk of failing to achieve a given target revenue. Interpreting the revenue management problem in the framework of finite Markov decision processes, we augment the state space of the risk-neutral problem definition and change the objective function to the probability of failing a certain specified target revenue. This enables us to obtain a dynamic programming solution that generates the policy minimising the risk of not attaining this target revenue. We compare this solution with recently proposed risk-sensitive policies in a numerical study and discuss advantages and limitations.

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Section: Related Workmentioning

confidence: 99%

Risk minimising strategies for revenue management problems with target values

Koenig

Meissner

2016

Journal of the Operational Research Society

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“…In the field of OM, the studies incorporating risk aversion are rich (e.g., [13], [15], [18], [19], and [43]). Choi et al [13] and Eeckhoudt et al [15] investigate the optimal decisions of riskaverse news vendors.…”

Section: Risk Aversionmentioning

confidence: 99%

“…Choi et al [13] and Eeckhoudt et al [15] investigate the optimal decisions of riskaverse news vendors. Xiong et al [43] consider overbooking problems of risk-averse decision makers. Gan et al [18] provide the definition of coordination of supply chains consisting of risk-averse members.…”

Section: Risk Aversionmentioning

confidence: 99%

“…In general, the characterization of risk averse consists of: 1) mean-variance framework (e.g., [13]); 2) concave utility functions according to expected utility theory (e.g., [15] and [43]); and 3) other measurements such as downside-risk and value-at-risk (e.g., [19]). This paper employs the second one and assumes that the customers have an identical utility function that is increasing and concave.…”

Section: Risk Aversionmentioning

confidence: 99%

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Web System Upgrading with Transaction Failure and Strategic Customers

Deng

Zhong

Xie

et al. 2014

IEEE Trans. Syst. Man Cybern, Syst.

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This paper considers pricing and web system upgrading problems for an online retailer facing a group of strategic customers. Due to various website issues, there is a possibility of transaction failure in the process of customer online purchasing. Strategic customers will anticipate this possibility and make purchasing decisions based on their belief on transaction success probability (TSP). First, we prescribe a threshold policy for customer purchasing: The customer will buy the product if his valuation for this product is above a threshold and will not otherwise. The threshold increases as TSP decreases, customer transaction cost increases, or customers become more risk averse. Second, we derive the optimal price of each period and identify the optimal policy for web system upgrading: There exists a threshold for each period such that the online retailers should upgrade their web system to the state of art (i.e., achieve highest available TSP) only if current TSP is below the threshold and should not upgrade otherwise. The threshold (total discounted profit) increases as customer transaction cost decreases, customer valuations for the product become higher, or customers become more (less) risk averse. Third, we find that the online retailer tends to price higher if it ignores customer strategic behavior. The cost of ignoring customer strategic behavior is substantial. The profit-loss rate of ignoring customer strategic behavior increases as customer transaction cost increases, customer valuations for the product become lower, or customers become more risk averse.

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“…For every DM, their preference structure can be regarded as the reflection of individual needs, personality traits, values, experiences, and subjective judgments. Because individuals make decisions and perform actions according to what they perceive, it is important to take human subjectivity into account as part of the decision-making process (Chen, 2011;Xiong et al, 2011). Therefore, the same criterion may play different roles for different types of DMs.…”

Section: Introductionmentioning

confidence: 99%

A new decision support model in multi-criteria decision making with intuitionistic fuzzy sets based on risk preferences and criteria reduction

Liu

et al. 2013

Journal of the Operational Research Society

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In this paper, we propose a new model for decision support to address the 'large decision table' (eg, many criteria) challenge in intuitionistic fuzzy sets (IFSs) multi-criteria decision-making (MCDM) problems. This new model involves risk preferences of decision makers (DMs) based on the prospect theory and criteria reduction. First, we build three relationship models based on different types of DMs' risk preferences. By building different discernibility matrices according to relationship models, we find useful criteria for IFS MCDM problems. Second, we propose a technique to obtain weights through discernibility matrix. Third, we also propose a new method to rank and select the most desirable choice(s) according to weighted combinatorial advantage values of alternatives. Finally, we use a realistic voting example to demonstrate the practicality and effectiveness of the proposed method and construct a new decision support model for IFS MCDM problems.

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Risk-averse decision making in overbooking problem

Cited by 8 publications

References 18 publications

Risk minimising strategies for revenue management problems with target values

Risk minimising strategies for revenue management problems with target values

Web System Upgrading with Transaction Failure and Strategic Customers

A new decision support model in multi-criteria decision making with intuitionistic fuzzy sets based on risk preferences and criteria reduction

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