A Risk-Averse Newsvendor Problem with Deferred Payments

In order to stimulate retailers to increase their order quantities, deferred payment, as a payment that is completely or partially postponed, has been widely used by suppliers in the real world. In this paper, we study a risk averse newsvendor problem with deferred payments. Under the Conditional Value-at-Risk (CVaR) criterion, we characterize retailer’s optimal order quantity. Further, we discuss the joint effects of risk aversion and deferred payments on retailer’s ordering decisions. Moreover, we characterize supplier’s optimal wholesale price when a retailer has a reserved cash flow. Our results show that supply chain’s efficiency could be improved by deferred payments.