Back to Search
Start Over
Ordering bias with two reference profits: Exogenous benchmark and minimum requirement.
- Source :
-
Transportation Research Part E: Logistics & Transportation Review . Aug2019, Vol. 128, p229-250. 22p. - Publication Year :
- 2019
-
Abstract
- • A newsvendor model with two reference points: industry benchmark and a minimum requirement on profit. • Dividing a newsvendor's psychological value into gains, losses, and failures. • Optimal order quantity as a tradeoff between marginal underage and overage costs, losses, and failures. • Decision bias significantly dependent on the endowed reference profits and the shortage cost. • A simple wholesale price may coordinate the supply chain with the reference effects. This paper studies a newsvendor's ordering decision with two exogenous reference points: industry benchmark and a minimum requirement on profit, based on which the psychological values are divided into gains, losses, and failures. With the objective to maximise the total expected value, the order quantity is to balance the marginal values of underage and overage costs, losses, and failures. The decision bias relative to a risk-neutral or a loss-averse newsvendor could be positive or negative and significantly determined by the reference profits and the shortage cost. In addition, a wholesale price contract may coordinate the supply chain under certain circumstances. [ABSTRACT FROM AUTHOR]
- Subjects :
- *NEWSVENDOR model
*WHOLESALE prices
*PROFIT
*SUPPLY chains
*EXPECTED returns
Subjects
Details
- Language :
- English
- ISSN :
- 13665545
- Volume :
- 128
- Database :
- Academic Search Index
- Journal :
- Transportation Research Part E: Logistics & Transportation Review
- Publication Type :
- Academic Journal
- Accession number :
- 137853820
- Full Text :
- https://doi.org/10.1016/j.tre.2019.06.007