Universität zu Köln

Bolton, Gary E. E., Bonzelet, Sabrina, Stangl, Tobias and Thonemann, Ulrich W. W. . Decision making under service-level contracts: The role of cost saliency. Prod. Oper. Manag.. HOBOKEN: WILEY. ISSN 1937-5956

Full text not available from this repository.

Abstract

This study examines human ordering behavior in service-level inventory contracts, a class of contracts important in practice. Studies of wholesale price contracts find that people tend to place orders that are suboptimal and biased toward mean demand. Unlike wholesale price contracts, service-level contracts can be parameterized such that they have steep expected profit functions, making the expected profit-maximizing order more salient, in the sense that deviations from optimal ordering are more costly. Utilizing an analytical model and results from existing literature, we hypothesize that people will order closer to optimality under service-level contracts with steeper expected profit functions. In a laboratory experiment, we find that subjects achieve up to 97.2% supply chain efficiency under a steep service-level contract, compared with 92.2% under a flat service-level contract, and steep service contract ordering also exhibits lower variability. Our results suggest that managers can benefit by designing service-level contracts with higher penalty costs and lower fill rates.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Bolton, Gary E. E. UNSPECIFIED UNSPECIFIED UNSPECIFIED Bonzelet, Sabrina UNSPECIFIED UNSPECIFIED UNSPECIFIED Stangl, Tobias UNSPECIFIED UNSPECIFIED UNSPECIFIED Thonemann, Ulrich W. W. UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-668771
DOI:	10.1111/poms.13925
Journal or Publication Title:	Prod. Oper. Manag.
Publisher:	WILEY
Place of Publication:	HOBOKEN
ISSN:	1937-5956
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language NEWSVENDOR PROBLEM; BOUNDED RATIONALITY; AVERSION; IMPACT; BIAS Multiple languages Engineering, Manufacturing; Operations Research & Management Science Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/66877