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The University of Southampton
CORMSIS Centre for Operational Research, Management Sciences and Information Systems

"On the Competitive Behavioral Newsvendor Problem: A Prospect Theory Framework" -- talk by Vipin Balakrishnan (Kanpur) Event

Time:
14:00 - 15:00
Date:
27 June 2019
Venue:
Building 2, Room 3041, University of Southampton, Highfield Campus, Southampton, SO17 1BJ

For more information regarding this event, please email Konstantinos Katsikopoulos at K.Katsikopoulos@southampton.ac.uk .

Event details

Experimental investigations into the ordering behavior of newsvendors in the competitive setting have shown deviations from the theoretical predictions based on traditional modeling. Several models have been proposed in anticipation of explaining the observed behaviors such as pull-to-center effect---ordering between the mean of the demand and rational order quantity and asymmetry in ordering. In the competitive newsvendor setting, we propose a prospect theory model to analyze the ordering behavior. Different demand splitting rules are considered in characterizing the properties of our model.

We conduct experiments to identify the behavior of the newsvendors in a competitive setting at different profit margins ranging from minimum to maximum. We observe that the order quantity follows a non-linear pattern over the profit margin at an aggregate level and at an individual level the actual order quantity differs significantly from the average behavior. Finally, we test the capability of our model to describe the actual behavior in the competitive newsvendor problem; results show that the model can capture the behavior at individual and aggregate levels.

 

Speaker information

Dr Vipin Balakrishnan, Indian Institute of Technology, Kanpur, is an Assistant Professor in the Department of Industrial and Management Engineering at IIT Kanpur, India. His research interests include decision theory, behavioral operations, operations management in multi-agent settings, and supply chain management. His publications have appeared in journals such as European Journal of Operational Research and Omega. He was a recipient of DAAD fellowship in 2015.

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