Newsvendor Models with Alternative Risk Preferences Within Expected Utility Theory and Prospect Theory Frameworks
Newsvendor models are widely used in the literature, and usually based upon the assumption of risk neutrality. Recently there is a growing body of literature that attempts to use alternative risk preferences rather than risk neutrality to describe the newsvendor decision-making behavior. In this chapter, we provide an overview of newsvendor models with alternative risk preferences within the expected utility theory and prospect theory frameworks and identify some directions for future research.
KeywordsExpected utility theory Prospect theory Risk aversion Loss aversion Newsvendor model Behavioral operations management
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