DC FieldValueLanguage
dc.contributorDepartment of Logistics and Maritime Studiesen_US
dc.creatorKouvelis, Pen_US
dc.creatorXiao, Gen_US
dc.creatorYang, Nen_US
dc.date.accessioned2021-04-28T02:29:13Z-
dc.date.available2021-04-28T02:29:13Z-
dc.identifier.issn0025-1909en_US
dc.identifier.urihttp://hdl.handle.net/10397/89683-
dc.language.isoenen_US
dc.publisherInstitute for Operations Research and the Management Sciencesen_US
dc.subjectRandom yielden_US
dc.subjectPrice postponementen_US
dc.subjectRisk aversionen_US
dc.subjectConsumer surplusen_US
dc.titleRole of risk aversion in price postponement under supply random yielden_US
dc.typeJournal/Magazine Articleen_US
dc.identifier.spage4826en_US
dc.identifier.epage4844en_US
dc.identifier.volume63en_US
dc.identifier.issue8en_US
dc.identifier.doi10.1287/mnsc.2020.3755en_US
dcterms.abstractPrice postponement is an effective mechanism to hedge against the adverse effect of supply random yield. However, its effectiveness and the resulting production decisions have not been studied for risk-averse firms. In this paper, we investigate the impact of price postponement and risk aversion under supply yield risk. Specifically, we study a risk-averse monopoly firm’s production and pricing decisions under supply random yield with two distinct pricing schemes: (1) ex ante pricing in which the firm simultaneously makes the sales price and sourcing decisions before production takes place and (2) responsive pricing in which the pricing decision is postponed until after the production yield realization. We adopt conditional value at risk (CVaR) as the riskaversion measurement and investigate the impact of the firm’s risk-aversion level on its optimal decisions and the corresponding profit. Among other results, we show that, for each pricing scheme, there exists a unique risk-aversion threshold under which the firm chooses not to produce. Interestingly, price postponement has no impact on the riskaversion threshold as the cutoff values under both pricing schemes are the same. We further show that the value of CVaR improvement from responsive pricing may not be monotonic in the firm’s risk-aversion level. Consequently, our results indicate that, although price postponement induces operational flexibility by better matching demand with available supply, whether the firm should adopt responsive pricing needs to be carefully evaluated as the benefit may not justify the potential fixed cost associated with price postponement, especially for a highly risk-averse firm. In addition, we show that responsive pricing, even with its ex post revenue-maximization behavior, benefits the endmarket consumers in equilibrium. Finally, we conduct extensive numerical studies to check and confirm the robustness of our results.en_US
dcterms.bibliographicCitationManagement science, Aug. 2020, v. 67, no. 8, p. 4826-4844en_US
dcterms.isPartOfManagement scienceen_US
dcterms.issued2020-08-
dc.identifier.eissn1526-5501en_US
dc.description.validate202104 bcvcen_US
dc.description.oaNot applicableen_US
dc.identifier.FolderNumbera0797-n03-
dc.identifier.SubFormID1665-
dc.description.fundingSourceRGCen_US
dc.description.fundingTextGeneral Research Fund Grant PolyU 15507218en_US
dc.description.pubStatusPublisheden_US
Appears in Collections:Journal/Magazine Article
Access
View full-text via PolyU eLinks SFX Query
Show simple item record

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.