 Inventory Decisions in the Presence of Strategic Customers: Theory and Behavioral EvidenceYang Zhang, Benny Mantin and Yaozhong Wu Production and Operations Management, 2019, vol. 28, issue 2, 374-392 Abstract: 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 customers 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. Date: 2019 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:popmgt:v:28:y:2019:i:2:p:374-392 Ordering information: This journal article can be ordered from Access Statistics for this article Production and Operations Management is currently edited by Kalyan Singhal More articles in Production and Operations Management from Production and Operations Management Society |
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