Individual differences in the newsvendor problem: Behavior and cognitive reflection

Brent B. Moritz, Arthur V. Hill, Karen L. Donohue

Research output: Contribution to journalArticlepeer-review

96 Scopus citations

Abstract

Previous research has shown that when solving a newsvendor problem, individuals systematically and persistently deviate from the profit maximizing quantity. This paper investigates the relationship between cognitive reflection and newsvendor decision making, testing experienced supply chain professionals and subjects affiliated with a university business school in a newsvendor experiment. We find that in high and medium critical ratio environments, individuals with higher cognitive reflection exhibit a lower tendency to chase demand. We also find that cognitive reflection is related to task outcome measures including average expected profit, average order quantity and order quantity variance, and that cognitive reflection is a better predictor of performance than college major, years of experience, and managerial position. These results suggest that cognitive reflection contributes to an understanding of newsvendor decision-making behavior.

Original languageEnglish (US)
Pages (from-to)72-85
Number of pages14
JournalJournal of Operations Management
Volume31
Issue number1-2
DOIs
StatePublished - Jan 2013

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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