THE RISK-AVERSE (AND PRUDENT) NEWSBOY

The effects of risk and risk aversion in the single-period inventory ( ''newsboy'') problem are examined. Comparative-static effects of chang es in the various price and cost parameters are determined and related to the newsboy's risk aversion. The addition of a random background w ealth and of an increase in the riskiness of newspaper demand are also examined. Although many of the comparative effects generally are ambi guous, some fairly simple restrictions on preferences and/or risk incr eases are shown to lead to qualitatively deterministic results.