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2015•Guanli kexue xuebaoRequires access

Prospect theory for newsvendor problems: Considering buyback and stockout penalty

Chu Hong-ru

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Abstract

In the framework of prospect theory,the newsvendor problems are investigated by considering bothbuyback and stockout penalty in three situations respectively. We analyze the relationship of the optimal order quantities between prospect theory and classic newsvendor based on some parameter conditions,and then give the monotonicity of the optimal order quantitieswithbuyback price and stockout penalty. Finally,the numerical results are carried out to support our conclusions.

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What this paper is about

In the framework of prospect theory,the newsvendor problems are investigated by considering bothbuyback and stockout penalty in three situations respectively. We analyze the relationship of the optimal order quantities between prospect theory and classic newsvendor based on some parameter conditions,and then give the monotonicity of the optimal order quantitieswithbuyback price and stockout penalty. Finally,the numerical results are carried out to support our conclusions.

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Available abstract

In the framework of prospect theory,the newsvendor problems are investigated by considering bothbuyback and stockout penalty in three situations respectively. We analyze the relationship of the optimal order quantities between prospect theory and classic newsvendor based on some parameter conditions,and then give the monotonicity of the optimal order quantitieswithbuyback price and stockout penalty. Finally,the numerical results are carried out to support our conclusions.

Key concepts: Newsvendor model, Stockout, Monotonic function, Order (exchange), Economic order quantity, Mathematical optimization, Economics, Mathematical economics

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