Journal Article
In this paper, the authors study the newsvendor’s pricing and stocking decisions under reference point effects. The demand faced by the newsvendor is endogenous and the customers may also decide to procure the product from an outside option. The authors characterize the firm’s optimal pricing and stocking decisions.
The authors' analysis reveals a threshold policy on the firm’s ordering and pricing decisions while considering the impact of reference point effects. The authors also find that as the level of optimism increases, the firm’s optimal ordering level decreases and optimal price increases.
The authors further study the impact of loss aversion on the firm’s ordering and pricing decisions.
