Mean-variance analysis of the newsvendor model with stockout cost

Jun Wu; Jian Li; Shouyang Wang; Edwin Tai Chiu Cheng

doi:10.1016/j.omega.2008.02.005

Mean-variance analysis of the newsvendor model with stockout cost

Jun Wu, Jian Li, Shouyang Wang, Edwin Tai Chiu Cheng

Research output: Journal article publication › Journal article › Academic research › peer-review

152 Citations (Scopus)

Abstract

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.

Original language	English
Pages (from-to)	724-730
Number of pages	7
Journal	Omega
Volume	37
Issue number	3
DOIs	https://doi.org/10.1016/j.omega.2008.02.005
Publication status	Published - 1 Jun 2009

Keywords

Mean-variance
Newsvendor problem
Stockout cost
Supply chain

ASJC Scopus subject areas

Strategy and Management
Management Science and Operations Research
Information Systems and Management

More information

10.1016/j.omega.2008.02.005

http://hdl.handle.net/10397/648

Cite this

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Mean-variance analysis of the newsvendor model with stockout cost

Abstract

Keywords

ASJC Scopus subject areas

More information

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