Additional-Ordering Newsvendor Model Based on CVaR Criterion and Lost Sale Penalty Cost

Based on the conditional value at risk criterion (CVaR), this paper constructed the additional-ordering newsvendor model considering the degree of risk aversion, the lost sale penalty cost and the limit of additional ordering, gave the satisfying conditions of optimal ordering quantity, and analyzed how the degree of risk aversion, the lost sale penalty cost, the net salvage value, the initial ordering cost and the additional ordering cost influenced the optimal ordering decision by numerical simulation. The results showed that: The optimal ordering quantity of the retailer monotonically decreased with respect to the degree of risk aversion, monotonically increased with respect to the lost sale penalty cost and the net salvage value, monotonically decreased with respect to the initial ordering cost, but showed no monotonicity with respect to the additional ordering cost under exponential demand distribution due to the effect of risk aversion degree and market demand distribution form. When the degree of risk aversion is relatively low, with the increase of the additional ordering cost, the decision maker is more inclined to increase the ordering quantity at the time of the initial order to reduce the total cost. When the degree of risk aversion is higher, with the increase of the additional ordering cost, the decision maker tends to reduce the ordering quantity at the time of initial order to avoid future risks. In addition, when the lost sale penalty cost, the net salvage value, the initial ordering cost and the additional ordering cost are constant, the optimal ordering quantity for a risk-averse retailer is always less than that for a risk-neutral retailer