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Matthias Koenig, Joern Meissner
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| Abstract |
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Consider a dynamic decision making model under risk with a fixed planning
horizon, namely the dynamic capacity control model. The model describes
a firm, operating in a monopolistic setting and selling a range of products
consuming a single resource. Demand for each product is time-dependent
and modeled by a random variable. The firm controls the revenue stream by
allowing or denying customer requests for product classes. We investigate
risk-sensitive policies in this setting, for which risk concerns are important
for many non-repetitive events and short-time considerations.
Numerically analyzing several risk-averse capacity control policies in
terms of standard deviation and conditional-value-at-risk, our results show
that only a slight modification of the risk-neutral solution is needed to
apply a risk-averse policy. In particular, risk-averse policies which decision
rules are functions depending only on the marginal values of the riskneutral
policy perform well. From a practical perspective, the advantage
is that a decision maker does not need to compute any risk-averse dynamic
program. Risk sensitivity can be easily achieved by implementing
risk-averse functional decision rules based on a risk-neutral solution. |
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| Keywords |
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Dynamic Decisions, Capacity Control, Revenue Management, Risk
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| Status |
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Working Paper |
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| Download |
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www.meiss.com/download/RM-Koenig-Meissner-02.pdf
(585 kb) |
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| Reference |
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BibTeX,
Plain Text |
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