Mean-downside-risk and mean-variance newsvendor models: Implications for sustainable fashion retailing |
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Authors: | Tsan-Ming ChoiChun-Hung Chiu |
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Institution: | a Business Division, Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong b Department of Management Science, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong |
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Abstract: | Newsvendor models have been well-established for studying supply chain management problems with fashionable products. In this paper, we explore the mean-downside-risk (MDR) and mean-variance (MV) newsvendor models under both the exogenous and endogenous retail price decision cases. We first construct analytical models with the MDR and MV objectives. We then show that the analytical solution schemes for both the MDR and MV problems are the same. With the measures for sustainability such as the expected quantity of goods leftover, the expected sales to expected goods leftover ratio, the rate of return on investment, and the probability of achieving a pre-determined profit target, we proceed to compare the levels of sustainability by the fashion retailers which employ the mean-risk and the risk neutral models. Insights are generated. |
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Keywords: | Fashion supply chain management Mean-downside risk analysis Mean-variance analysis Newsvendor problem |
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