Risk aversion in the price-setting newsvendor problem with random supply capacity
研究了风险规避的垄断企业在供应能力不确定和需求随机下的定价与订货决策，发现更风险规避的企业在温和条件下会设定更高的销售价格。
Both demand and supply uncertainties are major sources of risk in supply chain management. For this reason, the firms are implementing different strategies to manage joint uncertainty of demand and supply. Pricing is an essential strategy to alleviate the demand and supply risks. In this article, we study a risk-averse monopoly firm’s ordering and pricing decisions under supply capacity uncertainty with stochastic price-dependent demand. By adopting Conditional Value-at-Risk (CVaR) as the decision criterion, we obtain the equations that the optimal ordering and pricing decisions satisfy under random supply capacity, and prove that the unlimited capacity is its special case. Comparative statics show the monotonicity properties and other characteristics of the optimal pricing and ordering decisions. Finally, numerical examples are given to illustrate our results. Among our results, we analytically show that the more risk-averse firm charges a higher sales price under mild conditions. This relation is first obtained in the risk-averse price-setting newsvendor problem where both the demand and supply sides are uncertain.