Financial Management in Inventory Problems: Risk Averse vs Risk Neutral Policies

In thiswork,wediscusstheeffectofriskmeasureselectioninthedeterminationof inventorypolicies.Weconsideraninventorysystemcharacterizedbythelossfunction of Lucianoetal.[2003.VaRasariskmeasureformulti-periodstaticinventorymodels. International JournalofProductionEconomics81–82,375–384].Wederivethe optimization problemsfacedbyriskneutral,quadraticutility,mean-absoluteandCVaR decision makers.Resultsshowthatwhiletheglobalnatureoftheoptimalpolicyis assuredforriskcoherentandriskneutraldecisionmakers,theconvexityofthe quadraticutilityproblemdependsonthestochasticpropertiesofdemand.We investigatetheeconomicandstochasticdeterminantsofthedifferentpolicies.This allows ustoestablishtheconditionsunderwhicheachtypeofdecisionmakeris indifferenttoimprecisioninthedistributionfamilies.Finally,wediscussthenumerical impactofthechoiceoftheriskmeasurebymeansofamulti-iteminventory. The introduction ofanapproachbasedonSavageScoresallowsustoofferaquantitative measurementofthesimilarity/discrepancyofpoliciesreflectingdifferentriskattitudes.