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The max–min newsvendor pricing problem under conditional value-at-risk criterion

Author

Listed:
  • Wenyou Wang

    (Shanghai University of Finance and Economics)

  • Yao Yang

    (Shanghai University of Finance and Economics)

  • Sirong Luo

    (Shanghai University of Finance and Economics)

Abstract

This paper studies a risk-averse newsvendor pricing model with limited demand information under the conditional value-at-risk (CVaR) criterion. The paper uses a max–min approach and the objective is to maximize the lower bound on the CVaR of the loss, i.e., the negative of profit in the worst possible distribution case. The paper analyzes the optimal ordering and pricing decisions under both multiplicative and additive demand models, identifies the optimality conditions of the lower bound on the CVaR of loss, and obtains the implicit solutions for the optimal price and order quantity. Furthermore, the paper analyzes the sensitivity of optimal solutions with respect to the degree of risk aversion.

Suggested Citation

  • Wenyou Wang & Yao Yang & Sirong Luo, 2024. "The max–min newsvendor pricing problem under conditional value-at-risk criterion," Flexible Services and Manufacturing Journal, Springer, vol. 36(1), pages 71-102, March.
    • Handle: RePEc:spr:flsman:v:36:y:2024:i:1:d:10.1007_s10696-022-09472-9
    DOI: 10.1007/s10696-022-09472-9
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    References listed on IDEAS

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