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The Risk-Averse (and Prudent) Newsboy

Author

Listed:
  • Louis Eeckhoudt

    (Catholic Faculties of Mons, 7000 Mons, Belgium and Lille, France)

  • Christian Gollier

    (IDEI, University of Toulouse, 31042 Toulouse, France)

  • Harris Schlesinger

    (Department of Finance, University of Alabama, Tuscaloosa, Alabama 35487)

Abstract

The effects of risk and risk aversion in the single-period inventory ("newsboy") problem are examined. Comparative-static effects of changes in the various price and cost parameters are determined and related to the newsboy's risk aversion. The addition of a random background wealth and of an increase in the riskiness of newspaper demand are also examined. Although many of the comparative effects generally are ambiguous, some fairly simple restrictions on preferences and/or risk increases are shown to lead to qualitatively deterministic results.

Suggested Citation

  • Louis Eeckhoudt & Christian Gollier & Harris Schlesinger, 1995. "The Risk-Averse (and Prudent) Newsboy," Management Science, INFORMS, vol. 41(5), pages 786-794, May.
  • Handle: RePEc:inm:ormnsc:v:41:y:1995:i:5:p:786-794
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    File URL: http://dx.doi.org/10.1287/mnsc.41.5.786
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