A benchmark solution for the risk-averse newsvendor problem

Baruch Keren, Joseph S. Pliskin

Research output: Contribution to journalArticlepeer-review

90 Scopus citations


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 demonstrate how it can be used for assessing the newsvendor utility function parameters.

Original languageEnglish
Pages (from-to)1643-1650
Number of pages8
JournalEuropean Journal of Operational Research
Issue number3
StatePublished - 1 Nov 2006


  • Newsvendor problem
  • Risk-aversion
  • Uniform distribution
  • Utility theory

ASJC Scopus subject areas

  • General Computer Science
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management


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