Browsing by Author "Oyarzun, Diego"

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    Risk averse retail pricing with robust demand forecasting
    (ELSEVIER SCIENCE BV, 2012) Ferrer, Juan Carlos; Oyarzun, Diego; Vera, Jorge
    Good demand estimates are the key to effective pricing decision-making. However, they are subject to a high degree of uncertainty due to various factors that are unpredictable or difficult to model, thus making pricing decisions risky. This research provides a simple proposal for a robust optimization methodology that incorporates both demand uncertainty and the decision maker's degree of risk aversion. Uncertainty is explicitly considered for two coefficients of a linear demand function, price expressions are derived, and a criterion is proposed for defining the degree of risk aversion. The resulting model is also applied to an exponential demand case to better reflect a more realistic retail setting. (C) 2011 Elsevier B.V. All rights reserved.