IDEAS home Printed from
   My bibliography  Save this article

Inventory centralization with risk-averse newsvendors


  • Jiahua Zhang

    () (Fudan University)

  • Shu-Cherng Fang

    () (North Carolina State University)

  • Yifan Xu

    () (Fudan University)


In the paper, we study the inventory centralization problem with risk-averse newsvendors using cooperative game theory. Pareto-optimality and collective rationality conditions are adopted to characterize the stable profit allocations among coalition members. Pareto-optimal profit allocation rules are derived for exponential and power utilities while the necessary and sufficient conditions are shown for stable profit allocations. We also show that the game model has a nonempty core when the exponential and power utilities are adopted to describe the risk-averse behavior.

Suggested Citation

  • Jiahua Zhang & Shu-Cherng Fang & Yifan Xu, 2018. "Inventory centralization with risk-averse newsvendors," Annals of Operations Research, Springer, vol. 268(1), pages 215-237, September.
  • Handle: RePEc:spr:annopr:v:268:y:2018:i:1:d:10.1007_s10479-017-2578-0
    DOI: 10.1007/s10479-017-2578-0

    Download full text from publisher

    File URL:
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. David P. Baron, 1973. "Point Estimation and Risk Preferences," Discussion Papers 43, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Bruce C. Hartman & Moshe Dror, 1996. "Cost allocation in continuous‐review inventory models," Naval Research Logistics (NRL), John Wiley & Sons, vol. 43(4), pages 549-561, June.
    3. Mokrane Bouakiz & Matthew J. Sobel, 1992. "Inventory Control with an Exponential Utility Criterion," Operations Research, INFORMS, vol. 40(3), pages 603-608, June.
    4. Xin Chen, 2009. "Inventory Centralization Games with Price-Dependent Demand and Quantity Discount," Operations Research, INFORMS, vol. 57(6), pages 1394-1406, December.
    5. Montrucchio, Luigi & Scarsini, Marco, 2007. "Large newsvendor games," Games and Economic Behavior, Elsevier, vol. 58(2), pages 316-337, February.
    6. Gotoh, Jun-ya & Takano, Yuichi, 2007. "Newsvendor solutions via conditional value-at-risk minimization," European Journal of Operational Research, Elsevier, vol. 179(1), pages 80-96, May.
    7. Xin Chen & Jiawei Zhang, 2009. "A Stochastic Programming Duality Approach to Inventory Centralization Games," Operations Research, INFORMS, vol. 57(4), pages 840-851, August.
    8. Chun-Hung Chiu & Tsan-Ming Choi, 2016. "Supply chain risk analysis with mean-variance models: a technical review," Annals of Operations Research, Springer, vol. 240(2), pages 489-507, May.
    9. 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.
    10. Ulac{s} Özen & Jan Fransoo & Henk Norde & Marco Slikker, 2008. "Cooperation Between Multiple Newsvendors with Warehouses," Manufacturing & Service Operations Management, INFORMS, vol. 10(2), pages 311-324, February.
    11. Baton, Bernard & Lemaire, Jean, 1981. "The Core of a Reinsurance Market," ASTIN Bulletin, Cambridge University Press, vol. 12(1), pages 57-71, June.
    12. Hui Zhao & Vinayak Deshpande & Jennifer K. Ryan, 2005. "Inventory Sharing and Rationing in Decentralized Dealer Networks," Management Science, INFORMS, vol. 51(4), pages 531-547, April.
    13. Özen, Ulaş & Sošić, Greys & Slikker, Marco, 2012. "A collaborative decentralized distribution system with demand forecast updates," European Journal of Operational Research, Elsevier, vol. 216(3), pages 573-583.
    14. Slikker, Marco & Fransoo, Jan & Wouters, Marc, 2005. "Cooperation between multiple news-vendors with transshipments," European Journal of Operational Research, Elsevier, vol. 167(2), pages 370-380, December.
    15. Louis Eeckhoudt & Christian Gollier & Harris Schlesinger, 1995. "The Risk-Averse (and Prudent) Newsboy," Management Science, INFORMS, vol. 41(5), pages 786-794, May.
    16. Xin Chen & Stephen Shum & David Simchi-Levi, 2014. "Stable and Coordinating Contracts for a Supply Chain with Multiple Risk-Averse Suppliers," Production and Operations Management, Production and Operations Management Society, vol. 23(3), pages 379-392, March.
    17. Ganesh Janakiraman & John A. Muckstadt, 2004. "Inventory Control in Directed Networks: A Note on Linear Costs," Operations Research, INFORMS, vol. 52(3), pages 491-495, June.
    18. 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.
    19. Muller, Alfred & Scarsini, Marco & Shaked, Moshe, 2002. "The Newsvendor Game Has a Nonempty Core," Games and Economic Behavior, Elsevier, vol. 38(1), pages 118-126, January.
    20. Gary D. Eppen, 1979. "Note--Effects of Centralization on Expected Costs in a Multi-Location Newsboy Problem," Management Science, INFORMS, vol. 25(5), pages 498-501, May.
    21. Gerber, Hans U., 1974. "On Additive Premium Calculation Principles," ASTIN Bulletin, Cambridge University Press, vol. 7(3), pages 215-222, March.
    22. Choi, Sungyong & Ruszczynski, Andrzej, 2011. "A multi-product risk-averse newsvendor with exponential utility function," European Journal of Operational Research, Elsevier, vol. 214(1), pages 78-84, October.
    23. Xin Fang & Soo-Haeng Cho, 2014. "Stability and Endogenous Formation of Inventory Transshipment Networks," Operations Research, INFORMS, vol. 62(6), pages 1316-1334, December.
    24. Xin Chen & Melvyn Sim & David Simchi-Levi & Peng Sun, 2007. "Risk Aversion in Inventory Management," Operations Research, INFORMS, vol. 55(5), pages 828-842, October.
    Full references (including those not matched with items on IDEAS)


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:annopr:v:268:y:2018:i:1:d:10.1007_s10479-017-2578-0. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Springer Nature Abstracting and Indexing). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.