Comparative analysis of optimal strategies with two purchase modes under different risk-averse criterions

Consider a risk-averse newsvendor who has an option to purchase the units that are short at an emergency purchase price after demand is realized. We use the conditional value-at-risk (CVaR) as the risk measure. The aim of the study is to investigate the optimal ordering decision in such a setting under CVaR only and mean-CVaR criterions. For each case, we derive the closed-form optimal solution and perform comparative statics to show the monotonicity properties and other characteristics of the optimal decisions. We also compare our results with those of risk-neutral newsvendor.

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