Loss-averse newsvendor model with two ordering opportunities and market information updating

Lijun Ma, Yingxue Zhao, Weili Xue, Edwin Tai Chiu Cheng, Houmin Yan

Research output: Journal article publicationJournal articleAcademic researchpeer-review

57 Citations (Scopus)

Abstract

A fashion supply chain characterized by a long lead time and a short selling season is considered in this paper. Facing demand uncertainty, the risk averse retailer has two opportunities to make order decisions before the demand is realized. The risk aversion is modelled as a penalty to the decision maker (the retailer) if a target profit is not attained. We derive the retailers optimal ordering decisions and analyze the monotonicity behaviours of the critical market signal, the optimal first-stage order quantity, and the optimal expected payoff with respect to the penalty coefficient. We also examine the impact of demand forecast quality on the retailers decisions and extend the study to the case where order cancellation is allowed.
Original languageEnglish
Pages (from-to)912-921
Number of pages10
JournalInternational Journal of Production Economics
Volume140
Issue number2
DOIs
Publication statusPublished - 1 Dec 2012

Keywords

  • Information update
  • Loss averse
  • Quick response
  • Supply chain management

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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