Les Cahiers de Recherche - HEC Paris
Christian Van Delft
Optimal strategy for stochastic product rollover under risk using CVAR analysis
(), Laoucine Kerbache
() and Hiba El Khoury
Abstract: Author's abstract. Motivated by many applications such as
typical blockbuster product launches, we address in this paper, an
inventory/production rollover process between an old and a new product,
with a random availability/admissibility date for the new product. The
optimization problem consists in nding the phase-in and phase-out dates
which minimize a cost minimization objective function. We capture, via a
CVar formulation, the risk phenomenon in the rollover decision making.
Then, we provide explicit closed-form expressions for the optimal policies,
which can be of three types: Planned Stock-out Rollover, Single Product
Rollover, and Dual-Product Rollover. The analysis led to several managerial
insights which are provided in the paper.
For instance, we exhibit,
first, the impact of risk-aversion on the optimal strategy structure. Then,
we show that increasing randomness of the availability date (in the
stochastic dominance sense) reinforces the structure of the optimal
strategy. We show that the stock-out period is increased in case of optimal
Planned Stock-out Rollover and the overlap period is increased for optimal
Keywords: product rollover; uncertain approval date; planned stockout rollover (psr); single product rollover (spr); dual product rollover(dpr); risk sensitive optimization criterion; conditional value at risk (cvar); stochastic dominance; stochastic comparisons; (follow links to similar papers)
70 pages, December 20, 2011
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