The Impact of a Target on Newsvendor Decisions
Goal achieving is a commonly observed phenomenon in practice, and it plays an important role in decision making. In this paper, we investigate the impact of a target on newsvendor decisions. We take into account the risk and model the effect of a target by maximizing the satisficing measure of a new...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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Institute for Operations Research and the Management Sciences (INFORMS)
2015
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| Online Access: | http://hdl.handle.net/1721.1/99491 https://orcid.org/0000-0002-0888-9030 |
| _version_ | 1826213918709645312 |
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| author | Chen, Lucy Gongtao Long, Daniel Zhuoyu Perakis, Georgia |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Chen, Lucy Gongtao Long, Daniel Zhuoyu Perakis, Georgia |
| author_sort | Chen, Lucy Gongtao |
| collection | MIT |
| description | Goal achieving is a commonly observed phenomenon in practice, and it plays an important role in decision making. In this paper, we investigate the impact of a target on newsvendor decisions. We take into account the risk and model the effect of a target by maximizing the satisficing measure of a newsvendor’s profit with respect to that target. We study two satisficing measures: (i) conditional value at risk (CVaR) satisficing measure that evaluates the highest confidence level of CVaR achieving the target; (ii) entropic satisficing measure that assesses the smallest risk tolerance level under which the certainty equivalent for exponential utility function achieves the target. For both satisficing measures, we find that the optimal ordering quantity increases with the target level. We determine an optimal order quantity for a target-based newsvendor and characterize its properties with respect to, for example, product’s profit margin. |
| first_indexed | 2024-09-23T15:56:55Z |
| format | Article |
| id | mit-1721.1/99491 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T15:56:55Z |
| publishDate | 2015 |
| publisher | Institute for Operations Research and the Management Sciences (INFORMS) |
| record_format | dspace |
| spelling | mit-1721.1/994912022-09-29T17:13:52Z The Impact of a Target on Newsvendor Decisions Chen, Lucy Gongtao Long, Daniel Zhuoyu Perakis, Georgia Sloan School of Management Perakis, Georgia Perakis, Georgia Goal achieving is a commonly observed phenomenon in practice, and it plays an important role in decision making. In this paper, we investigate the impact of a target on newsvendor decisions. We take into account the risk and model the effect of a target by maximizing the satisficing measure of a newsvendor’s profit with respect to that target. We study two satisficing measures: (i) conditional value at risk (CVaR) satisficing measure that evaluates the highest confidence level of CVaR achieving the target; (ii) entropic satisficing measure that assesses the smallest risk tolerance level under which the certainty equivalent for exponential utility function achieves the target. For both satisficing measures, we find that the optimal ordering quantity increases with the target level. We determine an optimal order quantity for a target-based newsvendor and characterize its properties with respect to, for example, product’s profit margin. 2015-10-28T14:39:58Z 2015-10-28T14:39:58Z 2014-10 2012-09 Article http://purl.org/eprint/type/JournalArticle 1523-4614 1526-5498 http://hdl.handle.net/1721.1/99491 Chen, Lucy Gongtao, Daniel Zhuoyu Long, and Georgia Perakis. “The Impact of a Target on Newsvendor Decisions.” Manufacturing & Service Operations Management 17, no. 1 (February 2015): 78–86. https://orcid.org/0000-0002-0888-9030 en_US http://dx.doi.org/10.1287/msom.2014.0500 Manufacturing & Service Operations Management Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Institute for Operations Research and the Management Sciences (INFORMS) Prof. Perakis via Shikha Sharma |
| spellingShingle | Chen, Lucy Gongtao Long, Daniel Zhuoyu Perakis, Georgia The Impact of a Target on Newsvendor Decisions |
| title | The Impact of a Target on Newsvendor Decisions |
| title_full | The Impact of a Target on Newsvendor Decisions |
| title_fullStr | The Impact of a Target on Newsvendor Decisions |
| title_full_unstemmed | The Impact of a Target on Newsvendor Decisions |
| title_short | The Impact of a Target on Newsvendor Decisions |
| title_sort | impact of a target on newsvendor decisions |
| url | http://hdl.handle.net/1721.1/99491 https://orcid.org/0000-0002-0888-9030 |
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