Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94016
Authors: 
Herweg, Fabian
Year of Publication: 
2012
Series/Report no.: 
SFB/TR 15 Discussion Paper 389
Abstract: 
We modify the classic single-period inventory management problem by assuming that the newsvendor is expectation-based loss averse according to Köszegi and Rabin (2006, 2007). Expectation-based loss aversion leads to an endogenous psychological cost of leftovers as well as stockouts. If there are no monetary stockout costs, then the loss-averse newsvendor orders a quantity lower than the quantity ordered by a profit-maximizing newsvendor. If there are positive monetary costs associated with stockouts, then the loss-averse newsvendor places suboptimal orders, which can be either too high or too low.
Subjects: 
behavioral
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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