The Newsvendor Problem Based on Multiple Reference Points

Abstract

This article will introduce the minimum requirement and the statue quo reference points into newsvendor model. Then the problem of decision bias can be well explained through researching multiple reference points. Many papers confirm the loss aversion is one of the important factors in the decision-making bias and plays an important role in ordering decisions. We propose crossing failure is more important than the loss aversion depending on the decision maker's degree of the aversion. In this note, we present situation where minimum requirement and status quo reference point impact the order decision and give a breakthrough in the study of multiple reference points of newsvendor problem.