Loss-averse behavior makes the newsvendors avoid the losses more than seeking the probable gains as the losses have more psychological impact on the newsvendor than the gains. In economics and decision theory, the classical newsvendor models treat losses and gains equally likely, by disregarding the expected utility when the newsvendor is loss-averse. Moreover, the use of unbounded utility to m...

In the newsvendor problem a decision maker orders inventory before a one period selling season with stochastic demand. If too much is ordered, stock is left over at the end of the period, whereas if too little is ordered, sales are lost. The expected profit-maximizing order quantity is well known, but little is known about how managers actually make these decisions. We describe two experiments ...

This paper examines a single-period inventory problem with random capacity and demand, where the loss-averse preference is adopted to describe the newsvendor’s decision-making behavior. When the loss-averse newsvendor orders, the supplier has some random replenishment capacity. He will choose an order quantity to maximize his expected utility. The newsvendor’s optimal ordering policy is obtaine...

In the era of Industry 4.0, firms are facing with greater uncertainty. Accordingly, it is important to select quality risk measures to analyze newsvendor problems under risk. Then, open innovation can be a good remedial option for such risk-averse newsvendors because open innovation can offset the profit losses from risk aversion by sharing revenues in supply chains. To find such risk measures ...

<p style='text-indent:20px;'>This paper studies a single-period inventory problem with quantity-oriented reference point, where the newsvendor has loss-averse preferences and conditional value-at-risk (CVaR) measure is introduced to hedge against his risk. It shown there exists unique optimal order quantity maximizing CVaR of utility. Moreover, it decreasing in loss aversion level, confid...

We extend behavioral research in newsvendor settings by experimentally exploring the effect of power on newsvendor order decisions under two profit conditions. We also analyze people's risk profiles and explore if the expo-power utility function, which relaxes the assumption of constant absolute risk aversion, explains observed behavior.

In financial economics in general the objective function expresses the risk preferences of the decision maker, see for example the mean variance approach in portfolio theory. Only recently in inventory management instead of maximizing expected profit or minimizing expected cost risk-averse objective functions have been used for determining the optimal order quantity. Examples are the exponentia...