Prospect Theory and the Newsvendor Problem

The newsvendor problem is a fundamental decision problem in operations management. Various independent experimental studies in laboratory settings have shown similar deviations from the theoretical optimal order quantity. We clarify that Prospect Theory, a prevalent framework for decision making under uncertainty, cannot explain the consistent empirical findings. This paper was accepted by Yossi Aviv, operations management.

• 저널Management Science · 60(4) · 1057–1062
• 토픽Supply Chain and Inventory Management · Management Information Systems
• DOI10.1287/mnsc.2013.1804
• 저자Mahesh Nagarajan, Steven M. Shechter