Impact of Joint Decisions and Cognitive Dissonance on Prepositioning (Newsvendor) Decisions
37 Pages Posted: 9 Aug 2013
Date Written: August 6, 2013
Prepositioning of emergency supplies is a critical task for the success of humanitarian relief operations. However, little is known about how humanitarian practitioners actually make prepositioning decisions. In a laboratory (lab) experiment based on the Newsvendor model, humanitarian practitioners prepositioned emergency supplies of different importance. When making single item decisions, practitioners’ prepositioning behavior shows the pull-to-center effect observed in traditional Newsvendor experiments. When making decisions for two items of different importance, practitioners either increase or reduce the pull-to-center effect. In particular, practitioners made joint prepositioning decisions in either a cognitive dissonant treatment, where a high-importance item in a low-safety stock condition was joined with a low-importance item in a high-safety stock condition; or a cognitive consonant treatment, where a high-importance item in a high-safety stock condition was joined with a low-importance item in a low-safety stock condition. Results show that the importance of emergency items in joint decisions influences prepositioning behavior, with dissonant prepositioning decisions increasing the pull-to-center effect for high-importance items, and consonant prepositioning decisions reducing the pull-to-center effect for high-importance items. Neither dissonance nor consonance influence prepositioning behavior for low-importance items. Our research suggests that cognitive dissonance can influence joint prepositioning decisions in Newsvendor settings.
Keywords: Behavioral Operations Management, Cognitive Dissonance, Debiasing, Inventory Prepositioning, Laboratory Experiments, Newsvendor Model, Pull-to-Center Effect
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