Optimal pricing and stocking decisions for newsvendor problem with value-at-risk consideration

Chun Hung Chiu; Tsan Ming Choi

doi:10.1109/TSMCA.2010.2043947

Optimal pricing and stocking decisions for newsvendor problem with value-at-risk consideration

Chun Hung Chiu, Tsan Ming Choi

The Hong Kong Polytechnic University

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

42 Citations (Scopus)

Abstract

Motivated by the popularity of VaR measure in financial applications, we study the classical newsvendor problem with Value-at-Risk (VaR) consideration and price-dependent demands. We first investigate the problem's structural properties and derive analytically the optimal joint stocking and pricing decisions. We then explore the difference between the optimal decisions under the VaR formulation and the classical expected profit-maximization model. Finally, we reveal an interesting analytical relationship between the inventory service level and the VaR measure. Insights are generated.

Original language	English
Article number	5443527
Pages (from-to)	1116-1119
Number of pages	4
Journal	IEEE Transactions on Systems, Man, and Cybernetics Part A:Systems and Humans
Volume	40
Issue number	5
DOIs	https://doi.org/10.1109/TSMCA.2010.2043947
Publication status	Published - 1 Sept 2010

Keywords

Joint pricing and inventory decision
newsvendor
value-at-risk (VaR)

ASJC Scopus subject areas

Control and Systems Engineering
Software
Human-Computer Interaction
Computer Science Applications
Electrical and Electronic Engineering

More information

10.1109/TSMCA.2010.2043947

Cite this

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Optimal pricing and stocking decisions for newsvendor problem with value-at-risk consideration

Abstract

Keywords

ASJC Scopus subject areas

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