Title :
Impact of initial wealth on newsvendor problem with S-shaped utility
Author :
Geng, Wei ; Zhao, Xiaobo
Author_Institution :
Dept. of Ind. Eng., Tsinghua Univ., Beijing, China
Abstract :
The bounded rationality of human behaviors in decision making can be characterized by an S-shaped utility function. We discuss a newsvendor problem with an S-shaped utility. It is shown that the expected utility of the final wealth is unimodal, based on which an optimal policy can be obtained. The impact of initial wealth is investigated and some structural properties of the optimal policy are given. Numerical examples illustrate the results.
Keywords :
consumer behaviour; decision making; operations research; profitability; supply and demand; decision making; human behaviors bounded rationality; initial wealth; newsvendor problem; optimal policy; s-shaped utility function; Costs; Decision making; Displays; Exponential distribution; Humans; Industrial engineering; Inventory management; Random variables; Stochastic processes; Utility theory; S-shaped utility; initial wealth; newsvendor;
Conference_Titel :
Industrial Engineering and Engineering Management, 2009. IEEM 2009. IEEE International Conference on
Conference_Location :
Hong Kong
Print_ISBN :
978-1-4244-4869-2
Electronic_ISBN :
978-1-4244-4870-8
DOI :
10.1109/IEEM.2009.5373339
