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Would a risk-averse newsvendor order less at a higher selling price?

We model a risk-averse newsvendor's decision-making behavior with some commonly used classes of utility functions within the expected utility theory (EUT) framework. Under fairly general conditions of EUT, we show that a risk-averse newsvendor will order less than an arbitrarily small quantity as selling price gets larger if price is higher than a threshold value, i.e., the optimal order quantity decreases as the selling price increases.
Year of publication:
2009
Authors: Wang, Charles X. ; Webster, Scott ; Suresh, Nallan C.
Published in:
European Journal of Operational Research. - Elsevier, ISSN 0377-2217. - Vol. 196.2009, 2, p. 544-553
Publisher: Elsevier
Keywords: Expected utility theory Risk aversion Newsvendor model
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Type of publication: Article
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Persistent link: https://www.econbiz.de/10005257310
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