Abstract
The main assumption underlying most supply chain models is the assumption of a fully rational expected profit maximizing decision maker. This might be correct assuming computerized decisions. But in reality most decisions are made by human decision makers and humans’ decisions are not always rational. This paper discusses recent behavioral operations literature describing different decision biases observed in laboratory experiments. Then, we analyze how human decision makers behave under three different supply contracts. Based on these observations we show how to take human behavior into account to improve supply chain performance.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
This paper is based on the doctoral thesis published as Becker-Peth (2012).
Bibliography
Arrow, K. J., T. Harris. 1951. Optimal Inventory Policy. Econometrica 19(3) 250–272.
Becker-Peth, M. 2012. Behavioral Supply Chain Contracting - Decision Biases in Behavioral Operations Management. Kölner Wissenschaftsverlag, Köln.
Bendoly, E. 2006. Incorporating Behavioral Theory in OM Empirical Models. Journal of Operations Management 24(6) 735–736.
Benzion, U.;Cohen, Y.; Peled, R.; Shavit, T. 2008. Decision-Making and the Newsvendor Problem: An Experimental Study. Journal of the Operational Research Society 59(9) 1281–1287.
Bolton, G. E.; Katok, E. 2008. Learning by Doing in the Newsvendor Problem: A Laboratory Investigation of the Role of Experience and Feedback. Manufacturing & Service Operations Management 10(3) 519–538.
Bolton, G. E.; Ockenfels, A.; Thonemann, U. W. 2012. Manager and Students as Newsvendors: How Experience Matters. Management Science 58(12) 22252233.
Cachon, G. P. 2003. Supply Chain Coordination with Contracts. S. Graves, T. De Kok, eds., Handbooks in Operations Research and Management Science, vol. 46, chap. 6. Elsevier, North-Holland, 229–340.
Croson, R.;Ren, Y. 2013. Overconfidence in Newsvendor Orders: An Experimental Study. Management Science (forthcoming).
Davis, A. M. 2009. An Experimental Investigation of Pull Contracts in Supply Chains. Johnson school research paper series no. 34-2011, Cornell University.
Destatis. 2012. Kennzahlen der Unternehmen des Verarbeitenden Gewerbes 2009, https://www.destatis.de/DE/ZahlenFakten/Wirtschaftsbereiche/ IndustrieVerarbeitendesGewerbe/Tabellen/KennzahlenVerarbeitendesGewerbe.html. Last access 27.04.2012.
Eeckhoudt, L.; Gollier, C.; Schlesinger, H. 1995. The Risk-Averse (and Prudent) Newsboy. Management Science 41(5) 786–794.
Kahneman, D. 2011. Thinking, Fast and Slow. Macmillan.
Kahneman, D.; Tversky, A. 1979. Prospect Theory: An Analysis of Decision Under Risk. Econometrica 47(2) 263–291.
Katok, E.; Wu, D. Y. 2009. Contracting in Supply Chains: A Laboratory Investigation. Management Science 55(12) 1953–1968.
Kremer, M.; Minner, S.; Van Wassenhove, L. N. 2010. Do Random Errors Explain Newsvendor Behavior? Manufacturing & Service Operations Management 12(4) 673-681.
Kremer, M.; Moritz, B.; Siemsen, E. 2011. Demand Forecasting Behavior: System Neglect and Change Detection. Management Science 57(10) 1827–1843.
Loch, C. H.; Wu, Y. 2007. Behavioral Operations Management. October, Now Publishers Inc.
Nahmias, S. 1993. Production and Operations Analysis. 2nd ed. Irwin, Homewood, IL.
Schweitzer, M. E.; Cachon, G. P. 2000. Decision Bias in the Newsvendor Problem with a Known Demand Distribution: Experimental Evidence. Management Science 46(3) 404–420.
Su, X. 2008. Bounded Rationality in Newsvendor Models. Manufacturing & Service Operations Management 10(4) 566–589.
Thaler, R. H. 1985. Mental Accounting and Consumer Choice. Marketing Science 4(3) 199–214.
Thonemann, U. W.; Brown, A. O.; Hausman, W. H. 2002. Easy Quantification of Improved Parts Spare Inventory Policies. Management Science 48(9) 1213–1225.
Tversky, A.; Kahneman, D. 1974. Judgment under Uncertainty: Heuristics and Biases. Science 185(4157) 1124–1131.
Wang, C.; Webster, S. 2009. The Loss-Averse Newsvendor Problem. Omega 37(1) 93105.
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2013 Springer Fachmedien Wiesbaden
About this chapter
Cite this chapter
Becker-Peth, M. (2013). How to Improve Supply Chain Performance by Anticipating Human Decision Behavior. In: Bogaschewsky, R., Eßig, M., Lasch, R., Stölzle, W. (eds) Supply Management Research. Advanced Studies in Supply Management. Springer Gabler, Wiesbaden. https://doi.org/10.1007/978-3-658-03061-2_6
Download citation
DOI: https://doi.org/10.1007/978-3-658-03061-2_6
Publisher Name: Springer Gabler, Wiesbaden
Print ISBN: 978-3-658-03060-5
Online ISBN: 978-3-658-03061-2
eBook Packages: Business and Economics (German Language)