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A Risk-Averse Newsvendor Model under Stochastic Market Price

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Listed:
  • Huirong Zhang
  • Zhenyu Zhang
  • Jiaping Zhang
  • Haoran Zhang

Abstract

The optimal inventory control is closely related to an enterprise’s operational efficiency, survival, and development. Market price uncertainty is introduced into the newsvendor model and the uncertainty’s impact on the firm's optimal stocking quantity is discussed. The results show that the impact of stochastic market price on the optimal stocking quantity under a given condition mainly depends on the magnitude of inventory cost. When the inventory cost is low, the market price’s uncertainty leads the firm to increase the stocking quantity. In contrast, when the inventory cost is high, market price uncertainty leads the firm to decrease inventory. Besides, the risk-averse behaviour leads the firm to reduce its stocking quantity.

Suggested Citation

  • Huirong Zhang & Zhenyu Zhang & Jiaping Zhang & Haoran Zhang, 2021. "A Risk-Averse Newsvendor Model under Stochastic Market Price," Discrete Dynamics in Nature and Society, Hindawi, vol. 2021, pages 1-9, September.
    • Handle: RePEc:hin:jnddns:9967359
    DOI: 10.1155/2021/9967359
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