Human Behavior in Newsvendor Decisions: A Comparative Study with Experimental Results

Abstract

As decision makers do not make optimal decisions in practice despite the existence of optimal solutions in many mod? els, there has been a rising interest in behavioral operations management recently. In this study, we aim for a compara? tive study to analyze the inventory decisions in Korea, America, and China, by conducting the same newsvendor ex? periment in Korea and compare the results with those of previous studies. From the comparative analysis, some na? tional characteristics in decision-making processes have been observed but there is lowly significant difference in or? der quantities among the three groups. Korean students show lower level of understanding in demand distributions and tendencies of anchoring on the mean demand and being risk-averse. The finding that individuals make their own deci? sions differently based on their different behaviors suggests that we need to consider individual approach in analyzing human decision-making processes rather than adapting aggregate approach.