Journal of Northeastern University Natural Science ›› 2020, Vol. 41 ›› Issue (4): 475-481.DOI: 10.12068/j.issn.1005-3026.2020.04.004

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Newsvendor Model with Overconfidence Behavior Under CVaR Criterion

CHEN Ke-gui1, HUANG Min2, WANG Xin-yu1   

  1. 1.School of Management, China University of Mining and Technology, Xuzhou 221116, China; 2 School of Information Science & Engineering, Northeastern University, Shenyang 110819, China.
  • Received:2019-04-02 Revised:2019-04-02 Online:2020-04-15 Published:2020-04-17
  • Contact: HUANG Min
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Abstract: In order to study the ordering strategy of risk-aversion retailers when they have overconfident behaviors in their beliefs in random market demand, CVaR was used as a risk measurement criterion, and an overconfident newsvendor model under CVaR was established. The effect of risk-aversion and overconfidence on retailer’s optimal ordering decision and corresponding conditional risk value was discussed. And the belief condition risk value and actual condition risk value of over confident retailers and fully rational retailers were analyzed. The results showed that overconfidence causes retailer to reduce the risk value of the condition and the order quantity deviates from full rational. Numerical examples verified the validity of the model and provided theoretical support for retailers’ ordering decisions in reality.

Key words: newsvendor model, overconfidence, risk-aversion, conditional value at risk(CVaR)criterion, optimal order quantity

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