Article (Scientific journals)
Inventory Decisions in the Presence of Strategic Customers: Theory and Behavioral Evidence
Zhang, Yang; Mantin, Benny; Wu, Yaozhong
2019In Production and Operations Management, 28 (2), p. 374-392
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Keywords :
newsvendor problem; strategic customers; behavioral theory
Abstract :
[en] We consider the inventory decision of a retailer facing strategic customers. We develop a behavioral theory that accounts for reference dependence, which makes predictions on how the presence of strategic customers leverages retailer behavior. Specifically, the reference-dependent retailer shall decrease her order quantity when there are more strategic customers in the population. As such, the conventional pull-to-center bias for newsvendor is generalized, since the presence of strategic consumers may induce the retailer to pull her order further below the center even when the production cost is low. Furthermore, increasing proportion of strategic customers reduces the retailer's ordering bias under low cost, yet amplifies it when the cost is high. Our subsequent experiments find pull-below-center effect, validate the theoretical predictions, and establish the asymmetry of reference dependence with the estimated behavioral parameters. We also study extensions to our model and carry out robustness checks of our experimental results.
Disciplines :
Production, distribution & supply chain management
Author, co-author :
Zhang, Yang
Mantin, Benny ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Wu, Yaozhong
External co-authors :
yes
Language :
English
Title :
Inventory Decisions in the Presence of Strategic Customers: Theory and Behavioral Evidence
Publication date :
February 2019
Journal title :
Production and Operations Management
ISSN :
1937-5956
Publisher :
Production Operations Management Society, Muncie, United States - Indiana
Volume :
28
Issue :
2
Pages :
374-392
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBilu :
since 18 June 2018

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