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The expectation-based loss-averse newsvendor

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  • Herweg, Fabian

Abstract

We modify the classic single-period inventory management problem by assuming that the newsvendor is expectation-based loss averse according to Kőszegi and Rabin (2006, 2007). We show that the expectation-based loss-averse newsvendor orders less than the profit-maximizing quantity. Moreover, the order placed by the expectation-based loss-averse newsvendor features plausible comparative statics of cost and price changes.

Suggested Citation

  • Herweg, Fabian, 2013. "The expectation-based loss-averse newsvendor," Economics Letters, Elsevier, vol. 120(3), pages 429-432.
    • Handle: RePEc:eee:ecolet:v:120:y:2013:i:3:p:429-432
    DOI: 10.1016/j.econlet.2013.05.035
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