Abstract
In this paper, we use Expectile-based Value at Risk (EVaR) measure as an objective function to determine newsvendor solutions with risk considerations. When the newsvendor makes a decision with risk-driven behavior, the optimal order quantity deviates from the classical expected profit-maximizing quantity. Our EVaR minimization model extends the classical newsvendor model through a one-parameter risk measure and facilitates trade-off analysis between the capital to be held in reserve and the expected profit. To illustrate the proposed model, we present optimal solutions based on different levels of risk aversion and risk-taking for three different demand distributions.
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