We study the risk-averse newsvendor model with a mean-variance objective function. We show that stockout cost has a significant impact on the newsvendor's optimal ordering decisions. In particular, with stockout cost, the risk-averse newsvendor does not necessarily order less than the risk-neutral newsvendor. We illustrate this finding analytically for the case where the demand follows the power distribution.
- Newsvendor problem
- Stockout cost
- Supply chain
ASJC Scopus subject areas
- Strategy and Management
- Management Science and Operations Research
- Information Systems and Management