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The risk-averse newsvendor game with competition on demand

Shen, Yuwei Tsinghua University Xie, Jinxing Tsinghua University

Optimization and Control mathscidoc:1611.27006

Journal of Industrial and Management Optimization, 12, (3), 2016
This paper studies the e ect of risk-aversion in the competitive newsvendor game. Multiple newsvendors with risk-averse preferences face a random demand and the demand is allocated proportionally to their inventory levels. Each newsvendor aims to maximize his expected utility instead of his expected pro t. Assuming a general form of risk-averse utility function, we prove that there exists a pure Nash equilibrium in this game, and it is also unique under certain conditions. We nd that the order quantity of each newsvendor is decreasing in the degree of risk-aversion and increasing in the initial wealth. Newsvendors with moderate preferences of risk-aversion make more pro ts compared with the risk-neutral situation. We also discuss the joint e ect of risk-aversion and competition. If the e ect of risk-aversion is strong enough to dominate the e ect of competition, the total inventory level under competition will be lower than that under centralized decision-making.
Inventory, risk-averse, newsvendor model, competition, Nash equilibrium
[ Download ] [ 2016-11-28 17:21:44 uploaded by jxie ] [ 1928 downloads ] [ 0 comments ] 
@inproceedings{shen,2016the,
  title={The risk-averse newsvendor game with competition on demand},
  author={Shen, Yuwei, and Xie, Jinxing},
  url={http://archive.ymsc.tsinghua.edu.cn/pacm_paperurl/20161128172144544045664},
  booktitle={ Journal of Industrial and Management Optimization},
  volume={12},
  number={3},
  year={2016},
}
Shen, Yuwei, and Xie, Jinxing. The risk-averse newsvendor game with competition on demand. 2016. Vol. 12. In Journal of Industrial and Management Optimization. http://archive.ymsc.tsinghua.edu.cn/pacm_paperurl/20161128172144544045664.
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