A benchmark solution for the risk-averse newsvendor problem

@article{Keren2006ABS,
  title={A benchmark solution for the risk-averse newsvendor problem},
  author={Baruch Keren and Joseph S. Pliskin},
  journal={European Journal of Operational Research},
  year={2006},
  volume={174},
  pages={1643-1650}
}
In this paper, we derive the first order conditions for optimality for the problem of a risk-averse expected-utility maximizer newsvendor. We use these conditions to solve a special case where the utility function is any increasing differentiable function, and the random demand is uniformly distributed. This special case has a simple closed form solution and therefore it provides an insightful and practical interpretation to the optimal point. We show some properties of the solution and also… CONTINUE READING

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