A Risk-Averse Newsvendor Model under Stochastic Market Price

Author:

Zhang Huirong1ORCID,Zhang Zhenyu2ORCID,Zhang Jiaping3ORCID

Affiliation:

1. School of Labor Relationship, Shandong Management University, Jinan 250357, China

2. School of Automation, Nanjing University of Science and Technology, Nanjing 210094, China

3. School of Public Administration, East China Normal University, Shanghai 200062, China

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.

Funder

Fund source: National Social Science Foundation of China

Publisher

Hindawi Limited

Subject

Modelling and Simulation

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