Behavioral Tendencies in Newsvendor Decision Making: Capturing the Chinese Perspective

Abstract

After many decades on focusing only on quantitative approaches for making decisions in manufacturing and supply chain management, researchers in operations management have recently acknowledged the importance of understanding the human behavior tendencies underlying these decisions. The result is a new stream of research in operations management focused on experiments using human subjects. However, most of these experiments were conducted in the US and Europe with the subject pool (students as well as practitioners) with western cultural and educational backgrounds. As the students and practitioners in China are culturally and educationally different from their western counterparts, it is conceivable that their behavioral tendencies are very different. Given that a large portion of the world’s industrial output comes from China, an understanding of the behavioral tendencies specific to those geographical regions is essential to achieve significant efficiency gains in the world economy. We compare results from experiments conducted in the US and China and observe that Chinese decision makers (i) ask a lot more questions before reaching their decision indicating that they are more worried about making the wrong decision; (ii) are more frequently able to come up with a new number as their decision whereas the American decision makers tend to use one of the given numbers as their decision; and (iii) are more cognizant of salvage values and as a result order more than the American decision makers.