Newsvendor Model with Defects

Posted on Wed 07 May 2014 in Core OM and supply chain • Tagged with newsvendor model, behavioral OM

How does a retailers order quantity change when his supplier sends products some of which are defective? To answer this question in a concrete context, consider the canonical newsvendor model - demand \(D\) is random and has cdf \(F\left( \cdot \right)\); cost per unit when the firm places orders is …

Continue reading

Ecological Rationality of Demand Chasing

Posted on Tue 06 May 2014 in Core OM and supply chain • Tagged with demand chasing, behavioral OM

Experimental literature that has looked at newsvendor decision-making documents a phenomenon called demand chasing wherein a decision-maker adjusts her order quantity in each period toward the demand realization in past period. This behavior is so obviously “irrational” (given the typical newsvendor setup where each period’s demand is statistically independent …

Continue reading

"Random" Ordering pattern from Deterministic Demand?

Posted on Sun 16 February 2014 in Core OM and supply chain • Tagged with randomness, chaos

While Prof. Sridhar Seshadri and I were co-teaching a PhD course where we were reading John Sterman’s paper on determistic chaos (Sterman, J., 1989. Deterministic Chaos in an Experimental Economic System Journal of Economic Behavior and Organization.), we were discussing the possibility of how determistic customer demands in simple …

Continue reading