Joint Inventory, Pricing, and Advertising Decisions with Surplus and Stockout Loss Aversions

The newsvendor models considering decision-makers’ behavioral factors remain a fruitful research area in operation management field in past decade. In this paper, we further extend the current literatures to look into joint inventory, pricing, and advertising decisions considering loss aversion effe...

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Main Authors: Bing-Bing Cao, Zhi-Ping Fan, Hongyan Li, Tian-Hui You
Format: Article
Language:English
Published: Wiley 2016-01-01
Series:Discrete Dynamics in Nature and Society
Online Access:http://dx.doi.org/10.1155/2016/1907680
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author Bing-Bing Cao
Zhi-Ping Fan
Hongyan Li
Tian-Hui You
author_facet Bing-Bing Cao
Zhi-Ping Fan
Hongyan Li
Tian-Hui You
author_sort Bing-Bing Cao
collection DOAJ
description The newsvendor models considering decision-makers’ behavioral factors remain a fruitful research area in operation management field in past decade. In this paper, we further extend the current literatures to look into joint inventory, pricing, and advertising decisions considering loss aversion effects under the newsvendor setting. The purpose is to explore how the loss aversions affect the optimal policy of order quantity, price, and advertising effort level. We present an integrated utility model to measure both economic payoff and loss aversion utility of the newsvendor, where surplus loss aversion and stockout loss aversion are first separately defined and quantified. Then, we analyze the optimal solution conditions of the integrated model under exogenous and endogenous price cases, respectively. Under exogenous price case, we find that the uniquely optimal policy exists and is presented in the closed form. Under endogenous price case, the optimal policy is determined under mild conditions; we also provide the solutions when order quantity factor or advertising effort level is fixed in this case. In addition, the sensitivity analysis shows that the loss aversions affect the optimal decisions of order quantity, price, and advertising effort level in a systematic way.
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spelling doaj-art-cfa24b659b324770965a6e1ad9d01a4b2025-02-03T01:23:08ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2016-01-01201610.1155/2016/19076801907680Joint Inventory, Pricing, and Advertising Decisions with Surplus and Stockout Loss AversionsBing-Bing Cao0Zhi-Ping Fan1Hongyan Li2Tian-Hui You3Department of Information Management and Decision Sciences, School of Business Administration, Northeastern University, Shenyang 110167, ChinaDepartment of Information Management and Decision Sciences, School of Business Administration, Northeastern University, Shenyang 110167, ChinaDepartment of Economics and Business Economics, School of Business and Social Sciences, Aarhus University, 8210 Aarhus, DenmarkDepartment of Information Management and Decision Sciences, School of Business Administration, Northeastern University, Shenyang 110167, ChinaThe newsvendor models considering decision-makers’ behavioral factors remain a fruitful research area in operation management field in past decade. In this paper, we further extend the current literatures to look into joint inventory, pricing, and advertising decisions considering loss aversion effects under the newsvendor setting. The purpose is to explore how the loss aversions affect the optimal policy of order quantity, price, and advertising effort level. We present an integrated utility model to measure both economic payoff and loss aversion utility of the newsvendor, where surplus loss aversion and stockout loss aversion are first separately defined and quantified. Then, we analyze the optimal solution conditions of the integrated model under exogenous and endogenous price cases, respectively. Under exogenous price case, we find that the uniquely optimal policy exists and is presented in the closed form. Under endogenous price case, the optimal policy is determined under mild conditions; we also provide the solutions when order quantity factor or advertising effort level is fixed in this case. In addition, the sensitivity analysis shows that the loss aversions affect the optimal decisions of order quantity, price, and advertising effort level in a systematic way.http://dx.doi.org/10.1155/2016/1907680
spellingShingle Bing-Bing Cao
Zhi-Ping Fan
Hongyan Li
Tian-Hui You
Joint Inventory, Pricing, and Advertising Decisions with Surplus and Stockout Loss Aversions
Discrete Dynamics in Nature and Society
title Joint Inventory, Pricing, and Advertising Decisions with Surplus and Stockout Loss Aversions
title_full Joint Inventory, Pricing, and Advertising Decisions with Surplus and Stockout Loss Aversions
title_fullStr Joint Inventory, Pricing, and Advertising Decisions with Surplus and Stockout Loss Aversions
title_full_unstemmed Joint Inventory, Pricing, and Advertising Decisions with Surplus and Stockout Loss Aversions
title_short Joint Inventory, Pricing, and Advertising Decisions with Surplus and Stockout Loss Aversions
title_sort joint inventory pricing and advertising decisions with surplus and stockout loss aversions
url http://dx.doi.org/10.1155/2016/1907680
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AT zhipingfan jointinventorypricingandadvertisingdecisionswithsurplusandstockoutlossaversions
AT hongyanli jointinventorypricingandadvertisingdecisionswithsurplusandstockoutlossaversions
AT tianhuiyou jointinventorypricingandadvertisingdecisionswithsurplusandstockoutlossaversions