The Impact of a Target on Newsvendor Decisions

• 成果类型: Article
• 署名作者: Chen, Lucy Gongtao; Long, Daniel Zhuoyu; Perakis, Georgia
• 署名单位: National University of Singapore; Chinese University of Hong Kong; Massachusetts Institute of Technology (MIT)
• 刊物名称: M&SOM-MANUFACTURING & SERVICE OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1523-4614
• DOI: 10.1287/msom.2014.0500
• 发表日期: 2015
• 页码: 78-86
• 关键词: Newsvendor; risk measure; target profit

摘要

Goal achieving is a commonly observed phenomenon in practice, and it plays an important role in decision making. In this paper, we investigate the impact of a target on newsvendor decisions. We take into account the risk and model the effect of a target by maximizing the satisficing measure of a newsvendor's profit with respect to that target. We study two satisficing measures: (i) conditional value at risk (CVaR) satisficing measure that evaluates the highest confidence level of CVaR achieving the target; (ii) entropic satisficing measure that assesses the smallest risk tolerance level under which the certainty equivalent for exponential utility function achieves the target. For both satisficing measures, we find that the optimal ordering quantity increases with the target level. We determine an optimal order quantity for a target-based newsvendor and characterize its properties with respect to, for example, product's profit margin.