Risk preferences and robust inventory decisions
AbstractRecently in inventory management instead of maximizing expected profit or minimizing expected cost risk-averse objective functions have been used for determining the optimal order quantity. We use the well-known newsvendor model to determine the optimal order quantity for an objective function with two risk parameters, which can describe risk-neutral, risk-averse as well as risk-taking behaviour of the inventory manager. This approach can also be applied to situations in which the demand distribution cannot be specified uniquely. We consider robust optimization procedures--maximin and minimax regret--to determine optimal order quantities if the set of potential demand variables can be partially ordered by stochastic dominance rules.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Production Economics.
Volume (Year): 118 (2009)
Issue (Month): 1 (March)
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Web page: http://www.elsevier.com/locate/ijpe
Risk preferences Robust decision making Newsvendor model;
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ERS-2003-068-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
- Mostard, Julien & de Koster, Rene & Teunter, Ruud, 2005. "The distribution-free newsboy problem with resalable returns," International Journal of Production Economics, Elsevier, vol. 97(3), pages 329-342, September.
- William L. Cooper & Diwakar Gupta, 2006. "Stochastic Comparisons in Airline Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 8(3), pages 221-234, February.
- Werner Jammernegg & Peter Kischka, 2007. "Risk-averse and risk-taking newsvendors: a conditional expected value approach," Review of Managerial Science, Springer, vol. 1(1), pages 93-110, April.
- Khouja, Moutaz, 1999. "The single-period (news-vendor) problem: literature review and suggestions for future research," Omega, Elsevier, vol. 27(5), pages 537-553, October.
- Halkos, George & Kevork, Ilias, 2012. "Validity and precision of estimates in the classical newsvendor model with exponential and rayleigh demand," MPRA Paper 36460, University Library of Munich, Germany.
- Halkos, George & Kevork, Ilias, 2012. "Evaluating alternative estimators for optimal order quantities in the newsvendor model with skewed demand," MPRA Paper 36205, University Library of Munich, Germany.
- Ancarani, A. & Di Mauro, C. & D'Urso, D., 2013. "A human experiment on inventory decisions under supply uncertainty," International Journal of Production Economics, Elsevier, vol. 142(1), pages 61-73.
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