The risk-averse (and prudent) newsboy

The risk-averse (and prudent) newsboy

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Article ID: iaor1996407
Country: United States
Volume: 41
Issue: 5
Start Page Number: 786
End Page Number: 794
Publication Date: May 1995
Journal: Management Science
Authors: , ,
Keywords: risk
Abstract:

The effects of risk and risk aversion in the single-period inventory (‘newsboy’) problem are examined. Comparative-static effects of changes in the various price and cost parameters are determined and related to the newsboy’s risk aversion. The addition of a random background wealth and of an increase in the riskiness of newspaper demand are also examined. Although many of the comparative effects generally are ambiguous, some fairly simple restrictions on preferences and/or risk increases are shown to lead to qualitatively deterministic results.

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