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

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  • Wang, Charles X.
  • Webster, Scott
  • Suresh, Nallan C.

Abstract

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.

Suggested Citation

  • Wang, Charles X. & Webster, Scott & Suresh, Nallan C., 2009. "Would a risk-averse newsvendor order less at a higher selling price?," European Journal of Operational Research, Elsevier, vol. 196(2), pages 544-553, July.
    • Handle: RePEc:eee:ejores:v:196:y:2009:i:2:p:544-553
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    References listed on IDEAS

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