Newsvendor Selling to Loss-Averse Consumers with Stochastic Reference Points

We study a newsvendor who sells a perishable asset over repeated sales seasons to loss averse consumers. We identify conditions under which the expected price can be increasing in the consumer loss aversion level, and numerically show that the firm can prefer low and moderate levels of demand variability over no demand uncertainty. Moreover, we obtain a set of counterintuitive insights on how consumers loss aversion affects the firms optimal operations policies.