Impacts of Hyperbolic Discounting on Inventory Replenishment Policy Under Inflation

Zhou Yongwu () and Lin Zhaozhan ()
Additional contact information
Zhou Yongwu: School of Business Administration, South China University of Technology, 510641, Guangzhou, China
Lin Zhaozhan: School of Business Administration, South China University of Technology, 510641, Guangzhou, China

Journal of Systems Science and Information, 2016, vol. 4, issue 1, 24-39

Abstract: Considering time inconsistency and inter-temporal preference of the decision maker who is facing inter-temporal choices, this paper employs hyperbolic discounting to reflect these characteristics in governing inventory replenishment policy under inflation. The authors take the subjective perception of the decision maker and the objective indicator from the capital market into consideration. The decision maker’s subjective perception includes confidence towards future value of money and anxiety to return the money, while the objective indicator is represented by the compounded discount rate. The results suggest that over the given planning horizon, with more confidence, inventory policy of larger order quantity and smaller order frequency should be adopted; with more anxiety within a threshold, inventory policy of smaller order quantity and larger order frequency should be adopted, and with more anxiety beyond this threshold, inventory policy keeps unchanged; with a larger discount rate, inventory policy of smaller order quantity and larger order frequency should be adopted.

Keywords: inventory; hyperbolic discounting; time value of money; time inconsistency; deteriorating items (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/JSSI-2016-0024 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:4:y:2016:i:1:p:24-39:n:2

DOI: 10.1515/JSSI-2016-0024

Access Statistics for this article

Journal of Systems Science and Information is currently edited by Shouyang Wang

More articles in Journal of Systems Science and Information from De Gruyter
Bibliographic data for series maintained by Peter Golla ().