Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1033217 | Omega | 2009 | 13 Pages |
Abstract
Newsvendor models are widely used in the literature, and usually based upon the assumption of risk neutrality. This paper uses loss aversion to model manager's decision-making behavior in the single-period newsvendor problem. We find that if shortage cost is not negligible, then a loss-averse newsvendor may order more than a risk-neutral newsvendor. We also find that the loss-averse newsvendor's optimal order quantity may increase in wholesale price and decrease in retail price, which can never occur in the risk-neutral newsvendor model.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Strategy and Management
Authors
Charles X. Wang, Scott Webster,