Optimal pricing and order quantity for the newsvendor problem with free shipping

2012 ◽  
Vol 135 (1) ◽  
pp. 162-169 ◽  
Author(s):  
Guowei Hua ◽  
Shouyang Wang ◽  
T.C.E. Cheng
Keyword(s):  
Newsvendor Problem ◽  
Optimal Pricing ◽  
Order Quantity ◽  
Free Shipping

scholarly journals Hedging Risks in the Loss-Averse Newsvendor Problem with Backlogging

Mathematics ◽  
2019 ◽  
Vol 7 (5) ◽  
pp. 429 ◽  
Author(s):  
Xiaoqing Liu ◽  
Felix T. S. Chan ◽  
Xinsheng Xu
Keyword(s):  
Value At Risk ◽  
Profit Maximization ◽  
Newsvendor Problem ◽  
Sensitivity Analyses ◽  
Conditional Value At Risk ◽  
Optimal Order ◽  
Newsvendor Model ◽  
Order Quantity ◽  
Decision Bias ◽  
Optimal Order Quantity

This paper studies the optimal order decisions for the loss-averse newsvendor problem with backordering and contributes to the risk hedging issue in the newsvendor model. The Conditional Value-at-Risk (CVaR) measure is applied to quantify the potential risks for the loss-averse newsvendor in a backordering setting, and we obtain the optimal order quantity for a loss-averse newsvendor to maximize the CVaR of utility. It is found that the optimal order quantity to maximize the CVaR objective could be bigger or smaller than the expected profit maximization (EPM) order quantity, which provides an alternative explanation on decision bias in the newsvendor model. This study also reveals that the optimal order quantity for a loss-averse newsvendor to maximize expected utility with backordering is smaller than the EPM order quantity, which implies that backordering encourages the loss-averse newsvendor to order fewer items. Sensitivity analyses are performed to investigate the properties of the optimal order quantities and managerial insights are suggested. This paper provides a novel method for the risk management of the loss-averse newsvendor model and presents several new ordering policies for the retailers in practice.

scholarly journals Optimal pre-sale policy for deteriorating items

2022 ◽  
Vol 12 (1) ◽  
pp. 109
Author(s):  
Lianxia Zhao ◽  
Hui Qiao ◽  
Qi An
Keyword(s):  
Existence And Uniqueness ◽  
Numerical Experiments ◽  
Optimal Solution ◽  
Inventory Model ◽  
Economic Order Quantity ◽  
Optimal Pricing ◽  
Order Quantity ◽  
Stock Level ◽  
Pricing Decisions ◽  
Theoretical Results

<p style='text-indent:20px;'>Pre-sale policy is a frequently-used sales approach for deteriorating products, e.g, fruits, vegetables, seafood, etc. In this paper, we consider an EOQ inventory model under pre-sale policy for deteriorating products, in which the demand of pre-sale period depends on price and pre-sale horizon, and the demand of spot-sale period depends on the price and stock level. Optimal pricing decisions and economic order quantity are also provided. We compare pre-sale model with a benchmark inventory model in which all the products are sold in spot-sale period. Theoretical results are derived to show the existence and uniqueness of the optimal solution. Numerical experiments are carried out to to illustrate the theoretical results. And sensitivity analysis is conducted to identify conditions under which the pre-sale policy is better off than the spot-sale only policy.</p>

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