Study on the Newsboy Containing Defective Products with Loss Probability Aversion and Loss Aversion

Abstract

In this paper, the problem of newsboy containing defective products with loss probability aversion and loss aversion is studied. The foreground value function is established. The concavity of the function is proved. The necessary conditions for the optimal order quantity to meet is revealed. Through compare static analysis we can get: the order quantity increases with increasing emphasis on the outcome of extreme monetization, and vice versa. An example is given to analyze the effect of loss sensitivity on the optimal order quantity. The results show that as the loss sensitivity increases, the optimal order quantity decreases and its foreground value decreases, and vice versa.