A Newsvendor Model With Uncertain Demand And Risk Aversion

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 market demand is random and the retailer is risk-neutral.However,since companies in practice have little observed or historic demand information due to the influence of cost,technology and some uncertain factors,the market demand is actually uncertain,and decision-makers are always risk-aversed under such uncertain environment.Therefore,it's of great practical and theoretical importance to study the newsvendor problem of which the demand is uncertain and the retailer has a risk-aversed appetite.Based on the uncertainty theory and the mean-TVaR criteria,the retailer's optimal order quantity and pricing problems are discussed under three conditions: no significant correlation between demand and price(or price fixing),price-dependent additive demand and pricedependent multiplicative demand.Besides,the influence of system parameters on retailer's optimal decisions is analyzed through a numerical simulation.The main conclusions are as follows:1.Under the assumption of uncertain market demand,it is proved that if the pricing decision is not taken into consideration,the retailer has a unique optimal order quantity decision with the mean-TVaR criterion;and if the demand is additively or multiplicatively depended on pricing and its failure rate is monotonically increasing,the retailer has a unique joint decision of order quantity and pricing with the mean-TVaR criterion.2.For the newsvendor problem that does not consider the retailer's pricing,the optimal order quantity will decrease as the retailer has a greater risk aversion degree,and will increase with a higher pricing,lower cost and greater residual value.For the newsvendor problem in which the demand is depend on the pricing,if the demand is additively depend on the pricing,and the risk aversion degree and confidence level of the retailer is high,the retailer's optimal joint decision will be a higher pricing and less order quantity;Conversely,the retailer's optimal joint decision will be a lower pricing and more order quantity.However,if the demand is multiplicatively depend on the pricing,the retailer will choose a higher pricing and more order quantity only when his risk aversion degree and confidence level is relatively low,otherwise a lower pricing and a corresponding order quantity will be the retailer's optimal joint decision.