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Loss-averse newsvendor model with two ordering opportunities and market information updating

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Listed:
  • Ma, Lijun
  • Zhao, Yingxue
  • Xue, Weili
  • Cheng, T.C.E.
  • Yan, Houmin

Abstract

A fashion supply chain characterized by a long lead time and a short selling season is considered in this paper. Facing demand uncertainty, the risk averse retailer has two opportunities to make order decisions before the demand is realized. The risk aversion is modelled as a penalty to the decision maker (the retailer) if a target profit is not attained. We derive the retailer's optimal ordering decisions and analyze the monotonicity behaviours of the critical market signal, the optimal first-stage order quantity, and the optimal expected payoff with respect to the penalty coefficient. We also examine the impact of demand forecast quality on the retailer's decisions and extend the study to the case where order cancellation is allowed.

Suggested Citation

  • Ma, Lijun & Zhao, Yingxue & Xue, Weili & Cheng, T.C.E. & Yan, Houmin, 2012. "Loss-averse newsvendor model with two ordering opportunities and market information updating," International Journal of Production Economics, Elsevier, vol. 140(2), pages 912-921.
    • Handle: RePEc:eee:proeco:v:140:y:2012:i:2:p:912-921
    DOI: 10.1016/j.ijpe.2012.07.012
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    8. Cui-Hua Zhang & Peng Xing & Jin Li, 2018. "Optimal Strategy of Social Responsibility and Quality Effort in Service Supply Chain with Quality Preference," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(03), pages 1-43, June.
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    17. Faiza Hamdi & Ahmed Ghorbel & Faouzi Masmoudi & Lionel Dupont, 2018. "Optimization of a supply portfolio in the context of supply chain risk management: literature review," Journal of Intelligent Manufacturing, Springer, vol. 29(4), pages 763-788, April.
    18. Patra, T. Devi Prasad & Jha, J.K., 2021. "A two-period newsvendor model for prepositioning with a post-disaster replenishment using Bayesian demand update," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    19. Niu, Baozhuang & Chu, Lap-Keung & Ni, Jian & Wang, Junwei, 2018. "Buy now and price later: Supply contracts with time-consistent mean–variance financial hedgingAuthor-Name: Li, Qiang," European Journal of Operational Research, Elsevier, vol. 268(2), pages 582-595.
    20. Weihua Liu & Donglei Zhu & Yijia Wang, 2017. "Capacity Procurement in Logistics Service Supply Chain with Demand Updating and Rational Expectation Behavior," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(06), pages 1-48, December.
    21. Weihua Liu & Xinran Shen & Di Wang, 2020. "The impacts of dual overconfidence behavior and demand updating on the decisions of port service supply chain: a real case study from China," Annals of Operations Research, Springer, vol. 291(1), pages 565-604, August.
    22. Kirshner, Samuel N. & Shao, Lusheng, 2018. "Internal and external reference effects in a two-tier supply chain," European Journal of Operational Research, Elsevier, vol. 267(3), pages 944-957.
    23. Rui Hou & Zibin Cui & You Zhao, 2022. "Pricing leadership decisions of competing firms with consumer learning," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2326-2346, September.
    24. Zhang, Xiang, 2014. "Reference-dependent electric vehicle production strategy considering subsidies and consumer trade-offs," Energy Policy, Elsevier, vol. 67(C), pages 422-430.

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