Multiperiod Inventory Management with Budget Cycles: Rational and Behavioral Decision-Making

Michael Becker-Peth, K Hoberg, M Protopappa-Sieke

Research output: Contribution to journalArticleAcademicpeer-review

2 Citations (Scopus)

Abstract

We examine inventory decisions in a multiperiod newsvendor model. In particular, we analyze the impact of budget cycles in a behavioral setting. We derive optimal rational decisions and characterize the behavioral decision-making process using a short-sightedness factor. We test the aforementioned effect in a laboratory environment. We find that subjects reduce order-up-to levels significantly at the end of the current budget cycle, which results in a cyclic pattern during the budget cycle. This indicates that the subjects are short-sighted with respect to future budget cycles. To control for inventory that is carried over from one period to the next, we introduce a starting-inventory factor and find that order-up-to levels increase in the starting inventory.
Original languageEnglish
Pages (from-to)643-663
Number of pages21
JournalProduction and Operations Management
Volume29
Issue number3
DOIs
Publication statusPublished - 25 Oct 2019

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