Abstract: In reality, there are temperature sensitive products, whose demands are usually related to the average temperature in the selling season. In joint pricing and ordering decisions for temperature sensitive product, the average temperature in the selling season can affect the market demand. Since the random variation of the average temperature exacerbates the fluctuation in the demand of the temperature sensitive product, the demand uncertainty increases with the random variation of the average temperature. With respect to the demand uncertainty, the retailer usually exhibits the psychological behaviors which can affect his/her decisions. Obviously, the variation of the average temperature and the behavioral factors of the retailer are important factors and cannot be ignored in joint pricing and ordering decisions for temperature sensitive product. Hence, it is necessary to pour attention to the study on joint pricing and ordering decisions considering the temperature and behavioral effects. Given that the existing research results are difficult to be used to solve the joint pricing and ordering decision problem for the temperature sensitive product considering the temperature and behavioral effects, the objective of this paper is to provide a decision method based on the optimization model to solve this problem. In this paper, two types of the temperature sensitive products are considered: One is the high-temperature suitable product, the temperature for its survival is higher and its market demand increases with the average temperature in the selling season. The other is the low-temperature suitable demand, the temperature for its survival is lower and its market demand decreases with the average temperature in the selling season. For demand uncertainty of the two types of the products, the retailer may exhibit the loss aversion. On the basis of this, the three questions concerned in this study are presented: (1) How does the average temperature in the selling season affect the demands of the two types of the products, respectively? (2) How is the loss aversion introduced into the joint pricing and ordering decision model for the two types of the products? (3) How do the average temperature in the selling season and the loss aversion affect the retailer's optimal price and order quantity? To answer these questions, the study is conducted by the following steps. First, the impact of the average temperature in the selling season on the market demand for the high-temperature suitable product and the low-temperature suitable product is analyzed, and the high- and low- temperature sensitive demand functions for the two types of the products are provided, respectively. Then, by analyzing the loss aversion of the retailer, the loss aversion utility is introduced into the total utility of the retailer based on the utility framework model proposed by Bell (1985), and a joint pricing and ordering decision model is constructed to maximize the retailer's total utility. Furthermore, according to the expected utility maximization theory, the retailer's optimal price and order quantity for the two types of the products can be obtained by solving the constructed model. Finally, the numerical study is conducted to show the impacts of the average temperature in the selling season and loss aversion parameter on the retailer's optimal price and order quantity with respect to the different temperature sensitive parameters. The results show that the average temperature in the selling season and retailer's loss aversion can affect the optimal policy in varying degree, and the optimal policy with consideration of the impact of the average temperature on the demand is more conservative than the one without the consideration of the impact of the average temperature on the demand. The results also show that, for the high-temperature suitable product, the order quantity of the loss-averse retailer is greater than the one of the loss-neutral retailer.

Key words: newsvendor, joint pricing and ordering decisions, temperature sensitive product, loss aversion