Impact of Joint Decisions and Cognitive Dissonance on Prepositioning (Newsvendor) Decisions

37 Pages Posted: 9 Aug 2013

See all articles by Paulo Gonçalves

Paulo Gonçalves

Institute of Management, Università della Svizzera italiana (USI, Lugano); Massachusetts Institute of Technology (MIT) - Sloan School of Management - Operations Management and System Dynamics

Jaime Andrés Castañeda

Universidad del Rosario

Date Written: August 6, 2013

Abstract

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

Suggested Citation

Gonçalves, Paulo and Castañeda, Jaime Andrés, Impact of Joint Decisions and Cognitive Dissonance on Prepositioning (Newsvendor) Decisions (August 6, 2013). MIT Sloan Research Paper No. 5021-13. Available at SSRN: https://ssrn.com/abstract=2306645 or http://dx.doi.org/10.2139/ssrn.2306645

Paulo Gonçalves (Contact Author)

Institute of Management, Università della Svizzera italiana (USI, Lugano) ( email )

Via Giuseppe Buffi, 13
Lugano, CH-6904
Switzerland
+41 (0)58 666 44 79 (Phone)
+41 (0)58 666 46 47 (Fax)

HOME PAGE: http://web.mit.edu/~paulopg/www/

Massachusetts Institute of Technology (MIT) - Sloan School of Management - Operations Management and System Dynamics ( email )

30 Wadsworth St. E53-339
Cambridge, MA 02142
United States

HOME PAGE: http://web.mit.edu/~paulopg/www/

Jaime Andrés Castañeda

Universidad del Rosario ( email )

CL 12 C 6 25
School of Management
Bogotá, D.C. 111711
Colombia
+57(1) 297-0200 ext. 3901 (Phone)

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