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Published in:
2013 | OriginalPaper | Chapter
The Loss-Averse Retailer’s Ordering Policy under Yield and Demand Uncertainty
Authors : Wei Liu, Shiji Song, Cheng Wu
Published in: Intelligent Computing for Sustainable Energy and Environment
Publisher: Springer Berlin Heidelberg
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This paper studies a single-period inventory problem with random yield and demand. In general, most of the previous works are based on the assumption of risk neutrality. We incorporate loss-averse preferences into this problem and the retailer’s objective is to maximize the expected utility. We obtain the retailer’s optimal ordering policy and then investigate the impact of loss aversion on it. Especially, if the shortage cost is small enough, the loss-averse retailer will always order less than the risk-neutral one. Moreover, the impacts of price and cost parameters on the loss-averse retailer’s optimal order quantity are analyzed. Then numerical experiments are conducted to illustrate our results.