On the newsvendor model with conditional Value-at-Risk of opportunity loss

Xinsheng Xu, Zhiqing Meng, Ping Ji, Chuangyin Dang, Hongwei Wang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

23 Citations (Scopus)


To manage the risk arising from uncertainty in market demand, this paper introduces the Conditional Value-at-Risk (CVaR) measure into the decision framework of the newsvendor who aims to minimise his opportunity loss. It is found under the CVaR measure that the newsvendors optimal order quantity is increasing in the confidence level when the understock loss is bigger than the overstock loss. This implies that an over-ordering may be even more caused by the newsvendors risk aversion about opportunity loss than risk seeking behaviour. Under this optimal order quantity, it is proved that the newsvendors expected profit and expected opportunity loss are decreasing and increasing in the confidence level, respectively. Furthermore, some management insights are presented to facilitate the risk management of the newsvendor model.
Original languageEnglish
Pages (from-to)2449-2458
Number of pages10
JournalInternational Journal of Production Research
Issue number8
Publication statusPublished - 17 Apr 2016


  • conditional Value-at-Risk
  • nventory
  • opportunity loss
  • optimal order quantity

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering


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