Article ID: | iaor20072669 |
Country: | United Kingdom |
Volume: | 13 |
Issue: | 3 |
Start Page Number: | 209 |
End Page Number: | 227 |
Publication Date: | May 2006 |
Journal: | International Transactions in Operational Research |
Authors: | Arcelus F.J., Srinivasan G., Kumar Satyendra |
Keywords: | risk |
This paper evaluates the pricing and ordering policies of risk-neutral, risk-averse and risk-seeking newsvendor-type retailers facing price-dependent stochastic demand and several sales-promotion policies, namely pricing, rebates and advertising. Optimal pricing and ordering policies are obtained for the iso-elastic demand function and for additive and multiplicative demand-error structures. Performance is measured by the risk-adjusted expected profit and evaluated across risk preferences. Pricing, rebate and advertising, in that order, are the most profitable sales-promotion policies. The more risk averse the retailer, the lower its profit and the more it favors multiple promotion policies.