Article ID: | iaor20117406 |
Volume: | 40 |
Issue: | 2 |
Start Page Number: | 188 |
End Page Number: | 198 |
Publication Date: | Apr 2012 |
Journal: | Omega |
Authors: | Kumar Satyendra, Srinivasan G, Arcelus F J |
Keywords: | inventory: order policies, combinatorial optimization, risk |
This paper evaluates the pricing and ordering policies of a retailer, facing a price‐dependent stochastic demand, within a newsvendor framework, under different degrees of risk tolerance and under a variety of optimizing objectives. These are (i) maximizing expected profit, for a retailer who may be risk‐seeker, risk‐averse or risk neutral; (ii) deriving a maximin strategy of maximizing a minimum guaranteed profit and (iii) modeling the probability of exceeding a target profit, as a constraint or as an objective. Some analytical properties and numerical examples illustrate the main features of the models and provide some comparative policy analysis across the model.