Title: The expectation-based loss-averse newsvendor
Abstract: Based on the traditional newsvendor model, we modify the classic single-period problem by assuming that the newsvendor is expectation-based loss averse. We highlight the influence of psychological reference point and loss aversion and find that if shortage cost is negligible, then a loss-averse newsvendor may order less than a risk-neutral newsvendor. We also find that if shortage cost is considered, the loss-averse newsvendor's optimal order quantity has something to do with the relation of the marginal overage loss and marginal underage loss, which can never occur in the risk-neutral newsvendor model.
Publication Year: 2015
Publication Date: 2015-05-01
Language: en
Type: article
Indexed In: ['crossref']
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