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Author: | Schweitzer, M.E. Cachon, G.P. |
Title: | Decision bias in the newsvendor problem with a known demand distribution: Experimental evidence |
Journal: | Management Science
2000 : MAR, VOL. 46:3, p. 404-420 |
Index terms: | Decision making Inventory control Management science |
Language: | eng |
Abstract: | In the newsvendor problem a decision maker orders inventory before a 1-period selling season with stochastic demand. If too much is ordered, stock is left over at the end of the period, whereas if too little is ordered, sales are lost. The expected profit-maximizing order quantity is well known, but little is known abut how managers actually make these decisions. There are 2 experiments described investigating newsvendor decisions across different profit conditions. Results from these studies demonstrate that choices systematically deviate from those that maximize expected profit. |
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