Problem definition: We consider a production system where a certain resource is used as the key raw material. The firm needs to decide the production quantity in each period facing stochastic demand and subject to the resource capacity constraint. The resource is self-renewable, and the growth...

Financial asset price movement impacts product demand and thus influences operational decisions of a firm. We develop and solve a general model that integrates financial risk hedging into a price-setting newsvendor. The optimal hedging strategy is found analytically, which leads to an explicit...