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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