We summarize the literature on human decision-making in the newsvendor model. In the newsvendor model, a decision maker faces stochastic demand and must determine the order quantity. Consistent findings in the literature are that people choose order quantities that are between expected-profit-maximizing quantities and mean demand and that they vary over time. We discuss how deviations of people’s orders from the expected-profit-maximizing quantities can be explained by decision biases and alternative utility functions. We also discuss how heterogeneity among people can explain between-subject variety, present alternative behavioral models, and identify potential areas for future research.
|Title of host publication||The Handbook of Behavioral Operations|
|Editors||K. Donohue, E. Katok, S. Leider|
|Place of Publication||Hoboken|
|Publisher||John Wiley & Sons Inc.|
|Number of pages||40|
|Publication status||Published - 1 Jan 2019|
Bibliographical notePublisher Copyright:
© 2019 John Wiley & Sons, Inc.