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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Production Economics.
Volume (Year): 118 (2009)
Issue (Month): 1 (March)
Contact details of provider:
Web page: http://www.elsevier.com/locate/ijpe
Risk preferences Robust decision making Newsvendor model;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maurice E. Schweitzer & Gérard P. Cachon, 2000. "Decision Bias in the Newsvendor Problem with a Known Demand Distribution: Experimental Evidence," Management Science, INFORMS, vol. 46(3), pages 404-420, March.
- 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.
- Louis Eeckhoudt & Christian Gollier & Harris Schlesinger, 1995. "The Risk-Averse (and Prudent) Newsboy," Management Science, INFORMS, vol. 41(5), pages 786-794, May.
- 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. "Evaluating alternative estimators for optimal order quantities in the newsvendor model with skewed demand," MPRA Paper 36205, University Library of Munich, Germany.
- Qiu, Ruozhen & Shang, Jennifer & Huang, Xiaoyuan, 2014. "Robust inventory decision under distribution uncertainty: A CVaR-based optimization approach," International Journal of Production Economics, Elsevier, vol. 153(C), pages 13-23.
- 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.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.