A price-setting newsvendor problem under mean-variance criteria

Javier Rubio-Herrero, Melike Baykal-Gürsoy, Anna Jas̈kiewicz

Research output: Contribution to journalArticle

23 Scopus citations

Abstract

The single-product, single-period newsvendor problem with two decision variables, namely price and stock quantity, is considered. The performance measure, in addition to the expected revenue, includes the variance of the income scaled with a risk parameter. We present conditions for the concavity of this risk-sensitive performance measure and the uniqueness of the optimal solution for both risk-averse and risk-seeking cases under the additive demand model, and compare the results to others previously published. These conditions are introduced in terms of the lost sales rate elasticity. Furthermore, we provide numerical examples that aim to endorse the theoretical results herein explained.

Original languageEnglish (US)
Pages (from-to)575-587
Number of pages13
JournalEuropean Journal of Operational Research
Volume247
Issue number2
DOIs
StatePublished - Dec 1 2015

All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

Keywords

  • Inventory
  • Pricing
  • Revenue management
  • Risk analysis
  • Uncertainty modeling

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