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The expectation-based loss-averse newsvendor

  • Beihang University

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

Based on the traditional newsvendor model, we modify the classic single-period problem by assuming that the newsvendor is expectation-based loss averse. We highlight the influence of psychological reference point and loss aversion and find that if shortage cost is negligible, then a loss-averse newsvendor may order less than a risk-neutral newsvendor. We also find that if shortage cost is considered, the loss-averse newsvendor's optimal order quantity has something to do with the relation of the marginal overage loss and marginal underage loss, which can never occur in the risk-neutral newsvendor model.

Original languageEnglish
Title of host publicationProceedings of the 2015 27th Chinese Control and Decision Conference, CCDC 2015
PublisherInstitute of Electrical and Electronics Engineers Inc.
Pages4644-4648
Number of pages5
ISBN (Electronic)9781479970179
DOIs
StatePublished - 17 Jul 2015
Event27th Chinese Control and Decision Conference, CCDC 2015 - Qingdao, China
Duration: 23 May 201525 May 2015

Publication series

NameProceedings of the 2015 27th Chinese Control and Decision Conference, CCDC 2015

Conference

Conference27th Chinese Control and Decision Conference, CCDC 2015
Country/TerritoryChina
CityQingdao
Period23/05/1525/05/15

Keywords

  • Expectation
  • Loss-averse
  • Newsvendor
  • Order Decision

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