Study On Newsvendor Model With Considering Behavior Factors Of Retailers

Newsvendor model is one of the basic single-period inventory model in supply chain management,in which an inventory decision problem of short-life-cycle products under demand uncertainty is studied.The classic newsvendor model assumes that the retailer is risk-neutral and aims at maximizing his expected profit.However,since the effects of the decision maker’s behavior factors,his decision may not be consistent with expected profit maximization in reality.Therefore it’s of great practical and theoretical importance to consider retailer’s behavior factors in newsvendor model.We first introduce risk aversion into the competitive newsvendor model to investigate the effects of risk aversion preferences on retailer’s order decisions.We demonstrate the existence of Nash equilibrium,which is unique under a fairly general condition.The total order quantity in equilibrium is decreasing in the degree of risk aversion and increasing in the initial wealth and the number of retailers.Newsvendors with moderate preferences of risk aversion make more profits compared with the risk-neutral situation.If the effect of risk aversion is strong enough to dominate the effect of competition,the total inventory level under competition will be lower than that under centralized decision-making.Then we consider the retailer’s order decision in the framework of prospect theory.Under the assumption of exponential S sharped utility function,we demonstrate the existence of reference point under which the retailer’s optimal order quantity is between the mean of demand and the optimal order quantity of the risk-neutral one.Under the assumption of general S sharped utility function and uniform distributed demand,we propose the necessary and sufficient conditions of that the retailer’s order quantity is higher(lower)than that of risk-neutral one.We find out the region of reference point,in which the retailer’s order quantity is between the mean of demand and the optimal order quantity of the risk-neutral one.These two models both conclude that incorporating the reference point into prospect theory-based newsvendor models can explain the pull-to-center effect which observed in newsvendor experiments.The major contributions of this dissertation are as follows:(1)We establish the risk averse newsvendor game model under competition on demand,and study the effects of retailers’ risk preferences and competition on their order quantities,expected profits and expected utilities;(2)We consider the retailer’s order decision under the framework of prospect theory,and discuss the impact of retailer’s reference point on his order decision;(3)With consideration of reference dependence,the prospect theory can explain the pull-to-center effect.