Characterizing the Retailer's Preference for Demand–Control and Demand–Promotion Efforts

This article investigates a setting where the retailer invests costly effort to shape demand, such as reducing demand fluctuation through demand–control effort or increasing demand levels with demand–promotion effort. We explore the preference bias between these two effort types and examine the impact of such a bias on profit performance. The experimental findings reveal that actual effort investments exhibit a significant preference bias for promotion effort in the low-profit condition, while no significant preference bias is observed in the high-profit condition. This behavioral pattern can be captured by a reference-dependent behavioral model incorporating the retailer's optimism level in the reference point. Additional analyses, such as robustness experiments and model extensions, provide further support for the promotion-effort bias in the low-profit condition. Our analysis presents a comprehensive understanding of demand-shaping effort preferences and extends the application of the reference-dependence framework. It provides insights for managers in identifying potential biases and mitigating profit loss in demand-shaping activities.

• 저널Production and Operations Management · 33(2) · 530–549
• 토픽Supply Chain and Inventory Management · Management Information Systems
• DOI10.1177/10591478231224965
• 저자Jose Benedicto Duhaylongsod, Yingshuai Zhao