Production Strategy Of The New Energy Vehicles Manufacturer Based On The Loss-averse Newsvendor Model

The application of the new energy vehicles is an important way to sustain the national energy and environmental development strategy, and creates a great opportunity for the development of our country’s automative industry. In the past few years, the industry went through three phases including initial phase, demonstration phase and rapid growth phase. After these stages, the new energy vehicle industry is improved. However, since most of studies about new energy vehicles are focused on either qualitative research of the government’s fiscal and taxation policy or empirical research of the consumers’ willingness to pay, there are few studies focused on the quantitative research of the optimal production strategies of the new energy vehicle manufacturer considering subsidy from government. This dissertation addresses the above gap by incorporating shortage cost, subsidy, emergency production and loss aversion, together with the proposed weight to the gain-loss utility to analyze their impacts on the firm’s decisions.Based on modeling method, considering the uncertain demand, subsidy, behavioral decision and profit target, this study proposes on several models to analyze the new energy vehicle manufacturer’s production strategy, the impacts of demand uncertainty, subsidy on the optimal production quantity and profit. The main contributions of this dissertation can be summarized in the following.The research provides a framework to illustrate shortage cost has an influence on the decision making process, the loss averse manufacturer will increase the production quantity in order to reduce shortage risk. Especially when the expected loss of shortage risk is larger than the expected loss of overage risk, the production quantity is increasing with respect to the loss aversion degree. Moreover, only if the subsidy’s marginal utility of shortage risk’s expected loss is larger than that of overage risk’s expected loss, the subsidy play a positive role in the production strategy of the new energy vehicles, thus the shortage cost can’t be ignored, otherwise it will cause the subsidy policy’s failure.This dissertation proposes to solve the shortage problem by emergency production, and find that strategy can avoid shortage risk well. The emergency production strategy can not only reduce the production quantity, but also improve the profit of the new energy vehicle manufacturer. The subsidy from government has a positive impact on both production quantity and expected utility but the loss aversion effect has a negative impact on them.This research proposes a new utility consists of consumer utility and gain-loss utility and the weight attaches to the gain-loss utility as well. By analyzing the production strategy of manufacturer whose profit target is expected profit, it reveals the traditional breakeven newsvendor model is a special case of this one.As well as the fixed profit reference model, the manufacturer can make decisions based on stochastic expected profit, when the stochastic demand’s probability density function;is the same as the uncertain demand, there is only one optimal production strategy, and the interactions among the parameters can be obtained.From what we have discussed in this dissertation, it reveals the emergency production strategy can avoid the shortage risk when the loss averse manufacturer considers expected profit. It can improve the profit of manufacturer in both fixed profit and stochastic profit conditions, thus it is a practical strategy.The results of this research help guide new energy vehicle companies to look beyond the traditional breakeven way of decision-making, by incorporating the uncertainty of demand, profit target and behavior factor. It reveals the link between behavior factor and production strategy, as well as the interaction mechanism among the influential variables and production. The results help both the new energy vehicle manufacturer and the government to find new ways to make optimal policies by providing relevvant theories, methods and tools.