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Journal of Applied Mathematics
Volume 2013, Article ID 636259, 12 pages
Research Article

Risk-Averse Newsvendor Model with Strategic Consumer Behavior

1School of Mathematics, Liaoning University, Shenyang, Liaoning 110036, China
2School of Management, Shanghai University, Shanghai 200444, China
3School of Management, Fudan University, Shanghai 200443, China

Received 1 February 2013; Revised 8 July 2013; Accepted 20 July 2013

Academic Editor: Mohammad Khodabakhshi

Copyright © 2013 Tie Wang and Qiying Hu. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


The classic newsvendor problem focuses on maximizing the expected profit or minimizing the expected cost when the newsvendor faces myopic customers. However, it ignores the customer’s bargain-hunting behavior and risk preference measure of the newsvendor. As a result, we carry out the rational expectation (RE) equilibrium analysis for risk-averse newsvendor facing forward-looking customers who anticipate future sales and choose purchasing timing to maximize their expected surplus. We propose the equations satisfied by the RE equilibrium price and quantity for the risk-averse retailer in general setting and the explicit equilibrium decisions for the case where demand follows the uniform distribution and utility is a general power function. We identify the impacts of the system parameters on the RE equilibrium for this specific situation. In particular, we show that the RE equilibrium price for some risk-averse newsvendors is lower than for a risk-neutral retailer and the RE equilibrium stocking quantity for some risk-averse newsvendors is higher than for a risk-neutral retailer. We also find that the RE equilibrium sale price for a risk-averse newsvendor is decreasing in salvage price in some situations.