Transfer of risk in the newsvendor model with discrete demand
In this paper we consider the transfer of risk in a newsvendor model with discrete demand. We view the newsvendor model as a leader/follower problem where the manufacturer (leader) decides the wholesale price and the retailer (follower) decides the quantity ordered. Taking a Pareto-optimal contract as a starting point, the manufacturer wishes to design a real option contract to enhance profits. A new real option contract is said to be feasible if both parties' expected profit is at least as great as in the original contract. When demand is discrete, there are usually infinite feasible contracts that yield maximum expected profits to the manufacturer. In the paper we show that either all, some or none of these real option contracts offer an improved position for the retailer.
If 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.
Volume (Year): 40 (2012)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
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.:
- Wang, Charles X. & Webster, Scott & Suresh, Nallan C., 2009. "Would a risk-averse newsvendor order less at a higher selling price?," European Journal of Operational Research, Elsevier, vol. 196(2), pages 544-553, July.
- Choi, Tsan-Ming & Li, Duan & Yan, Houmin, 2008. "Mean-variance analysis of a single supplier and retailer supply chain under a returns policy," European Journal of Operational Research, Elsevier, vol. 184(1), pages 356-376, January.
- 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.
- 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.
- Louis Eeckhoudt & Christian Gollier & Harris Schlesinger, 1995. "The Risk-Averse (and Prudent) Newsboy," Management Science, INFORMS, vol. 41(5), pages 786-794, May.
- Yang, Shilei & Shi, Chunming Victor & Zhao, Xuan, 2011. "Optimal ordering and pricing decisions for a target oriented newsvendor," Omega, Elsevier, vol. 39(1), pages 110-115, January.
- Lau, Hon-Shiang & Lau, Amy Hing-Ling, 1999. "Manufacturer's pricing strategy and return policy for a single-period commodity," European Journal of Operational Research, Elsevier, vol. 116(2), pages 291-304, July.
- Keren, Baruch & Pliskin, Joseph S., 2006. "A benchmark solution for the risk-averse newsvendor problem," European Journal of Operational Research, Elsevier, vol. 174(3), pages 1643-1650, November.
- Barry Alan Pasternack, 1985. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 4(2), pages 166-176.
- Lei Yang & Minghui Xu & Gang Yu & Hanqin Zhang, 2009. "SUPPLY CHAIN COORDINATION WITH CVaR CRITERION," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 26(01), pages 135-160.
- Jan A. Van Mieghem, 2007. "Risk Mitigation in Newsvendor Networks: Resource Diversification, Flexibility, Sharing, and Hedging," Management Science, INFORMS, vol. 53(8), pages 1269-1288, August.
- Choi, Tsan-Ming & Li, Duan & Yan, Houmin & Chiu, Chun-Hung, 2008. "Channel coordination in supply chains with agents having mean-variance objectives," Omega, Elsevier, vol. 36(4), pages 565-576, August.
- Andy A. Tsay, 1999. "The Quantity Flexibility Contract and Supplier-Customer Incentives," Management Science, INFORMS, vol. 45(10), pages 1339-1358, October.
- Wu, Jun & Li, Jian & Wang, Shouyang & Cheng, T.C.E., 2009. "Mean-variance analysis of the newsvendor model with stockout cost," Omega, Elsevier, vol. 37(3), pages 724-730, June.
- Terry A. Taylor, 2002. "Supply Chain Coordination Under Channel Rebates with Sales Effort Effects," Management Science, INFORMS, vol. 48(8), pages 992-1007, August.
- Linh, Cao To & Hong, Yushin, 2009. "Channel coordination through a revenue sharing contract in a two-period newsboy problem," European Journal of Operational Research, Elsevier, vol. 198(3), pages 822-829, November.
- Gérard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
- Martin A. Lariviere & Evan L. Porteus, 2001. "Selling to the Newsvendor: An Analysis of Price-Only Contracts," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 293-305, May.
- Wang, Charles X. & Webster, Scott, 2009. "The loss-averse newsvendor problem," Omega, Elsevier, vol. 37(1), pages 93-105, February.