Impact of loss aversion on the newsvendor game with product substitution

Liu, Wei; Song, Shiji; Wu, Cheng

doi:10.1016/j.ijpe.2012.08.017

Cited by 76 publications

(42 citation statements)

References 17 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Ref. [26] considers a newsvendor game where two substitutable products are sold by two heterogenous loss-averse newsvendors. First, they show that there exists a unique Nash equilibrium under certain conditions.…”

Section: Newsvendor Models With Loss Aversionmentioning

confidence: 99%

A Loss-Averse Newsvendor with Cap-and-Trade Carbon Emissions Regulation

Choi

2018

Sustainability

View full text Add to dashboard Cite

This study aims to provide an optimization model for operational efficiency in individual firms with cap-and-trade carbon emissions regulation. In addition, this study assumes that customers' demand takes a probability distribution. Under this circumstance, our intention is to draw theoretical and policy implications for carbon emissions regulation by setting and analyzing newsvendor models in which the decision maker is loss-averse for her risk preference. Then, we formulate two loss-averse newsvendor models where we use a "kinked" piecewise linear and concave utility function. More specifically, we show that our objective functions are concave to derive the existence and uniqueness of the optimal solution. After then, through a comparative static analysis, we conduct a sensitivity analysis of how the model parameters affect the optimal solution. Then, the analytical results can be summarized as follows. First, in a lost-sale model, loss aversion significantly affects the optimal policy of newsvendors' decision-making with cap-and-trade regulations. Second, in a stockout penalty cost model, the inclusion of cap-and-trade regulation terms and shortage penalty costs adds more structural complexity in the optimal solution. Thus, the directions of the impacts are mixed and the impacts on the optimal solutions are not monotone, especially with cap-and-trade terms. All these analytical results show big differences between the existing risk-neutral and our loss-averse models, which are confirmed by numerical experiments.

show abstract

Section: Newsvendor Models With Loss Aversionmentioning

confidence: 99%

A Loss-Averse Newsvendor with Cap-and-Trade Carbon Emissions Regulation

Choi

2018

Sustainability

View full text Add to dashboard Cite

show abstract

“…Huang et al [26] studied a newsvendor problem with partial product substitution and proposed an iterative algorithm. Liu et al [27] studied a newsvendor game with product substitution for two retailers. Goyal and Netessine [28] analyzed the volume exibility for two products with substitution of products.…”

Section: Literature Reviewmentioning

confidence: 99%

A robust optimization approach for an inventory problem with emergency ordering and product substitution in an uncertain environment: A case study in pharmaceutical industry

et al. 2017

View full text Add to dashboard Cite

Abstract. This paper presents a multi-product, multi-period inventory problem in an uncertain environment where the main suppliers are prone to yield uncertainty. In order to overcome the arisen uncertainties, two basic approaches of emergency ordering and product substitutability are taken into consideration. In the proposed emergency ordering scheme, two sets of suppliers, i.e. cheap unreliable and expensive reliable (emergency) suppliers, are considered and a tradeo between the cheap price of the main suppliers and reliability of emergency supplier is attained. In product substitution scheme, the demand of each product is ful lled directly by the related product or other substitute products. A riskaverse decision maker is taken into consideration whose risk-averseness level is controlled by the portion of demand which should be de nitely satis ed and not backordered or lost. A robust optimization approach with two variability measures is proposed to minimize the variability of the model. The results reveal the value of emergency ordering and product substitution. In addition, the results suggest which measure should be selected according to the decision maker's attitude toward the desired pro t, variability, and service level.

show abstract

“…Liu et al (2013) studied effect of substitution when two loss averse retailers are competing for substitutable product under stochastic demand rate and deterministic substitution rate. They have developed game theoretic model obtained unique optimal policy for Nash equilibrium under certain conditions.…”

Section: Literature Surveymentioning

confidence: 99%

An inventory model with shortages for imperfect items using substitution of two products

Mukhopadhyay

Goswami

2017

IJOR

View full text Add to dashboard Cite

Inventory models with imperfect quality items are studied by researchers in past two decades. Till now none of them have considered the effect of substitutions to cope up with shortage and avoid lost sales. This paper presents an EOQ approach for inventory system with shortages and two types of products with imperfect quality by one way substitution.Our model provides significant advantage for substitution case while maintaining its inherent simplicity. We have provided numerical example and sensitivity analysis to justify the effectiveness of our model. It is observed that, presence of imperfect items affect the lot size of minor and major products differently. Under certain conditions, our model generalizes the previous existing models in this direction.

show abstract

Impact of loss aversion on the newsvendor game with product substitution

Cited by 76 publications

References 17 publications

A Loss-Averse Newsvendor with Cap-and-Trade Carbon Emissions Regulation

A Loss-Averse Newsvendor with Cap-and-Trade Carbon Emissions Regulation

A robust optimization approach for an inventory problem with emergency ordering and product substitution in an uncertain environment: A case study in pharmaceutical industry

An inventory model with shortages for imperfect items using substitution of two products

Contact Info

Product

Resources

About