Risk management policies for dynamic capacity control

Koenig, Matthias and Meissner, Joern (2015) Risk management policies for dynamic capacity control. Computers and Operations Research, 59. pp. 104-118. ISSN 0305-0548

Full text not available from this repository.

Abstract

Abstract 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 analysing 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 risk-neutral 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.

Item Type:
Journal Article
Journal or Publication Title:
Computers and Operations Research
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/1700
Subjects:
ID Code:
82723
Deposited By:
Deposited On:
08 Nov 2016 12:00
Refereed?:
Yes
Published?:
Published
Last Modified:
04 Jun 2020 03:43