The Expectation-Based Loss-Averse Newsvendor

Arbeitspapier

We modify the classic single-period inventory management problem by assuming that the newsvendor is expectation-based loss averse according to Koszegi and Rabin (2006, 2007). Expectation-based loss aversion leads to an endogenous psychological cost of leftovers as well as stockouts. If there are no monetary stockout costs, then the loss-averse newsvendor orders a quantity lower than the quantity ordered by a profit-maximizing newsvendor. If there are positive monetary costs associated with stockouts, then the loss-averse newsvendor places suboptimal orders, which can be either too high or too low.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Munich Discussion Paper ; No. 2012-23

Classification and Topics

• Classification: Wirtschaft
• Subject: behavioral operations management ; inventory decision ; loss aversion ; newsvendor ; Lagerhaltungsmodell ; Risikoaversion ; Erwartungstheorie ; Verhaltensökonomik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Herweg, Fabian
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
• (where): München
• (when): 2012

Further information

• DOI: doi:10.5282/ubm/epub.14065
• Handle: http://hdl.handle.net/10419/104369
• URN: urn:nbn:de:bvb:19-epub-14065-5
• Last update: 10.03.2025, 11:43 AM CET