بازبینی نظریه چشم انداز و مساله روزنامه فروش Revisiting prospect theory and the newsvendor problem

1. Introduction In the past decade, behavioral operations management has garnered an increasing amount of research interest. In a pioneering work, Schweitzer and Cachon [8] conducted experiments to investigate the behavior of human decision-makers based on newsvendor settings. They observed that the order quantity of subjects exhibited a ‘‘pull-to-center’’ effect, i.e., the order quantity was likely to fall in the range between the 0.5 fractile of the demand distribution and the optimal solution. According to the newsvendor model, settings with a critical fractile in the range [0, 0.5) are classified as low-profit margins, whereas those with a critical fractile in the range (0.5, 1] are classified as high-profit margins. The pull-to-center effect then represents the case where the order quantity is too high for a low-profit-margin setting and too low for a high-profit-margin setting. Using experimental data, Schweitzer and Cachon [8] documented that prospect theory cannot predict the behavior of subjects. Following Schweitzer and Cachon [8], many researchers conducted numerous experiments to observe the pull-to-center effect. Recently, Nagarajan and Shechter [6] use a model of prospect theory with a power-type utility function to discuss its effectiveness in predicting the pull-to-center effect. For a low-profit-margin setting with only positive profit, they theoretically prove that the order quantity is lower than the optimal solution. For a high-profitmargin setting with only positive profit, they numerically show that the order quantity is higher than the optimal value. They then claim that prospect theory cannot explain the pull-to-center effect. In both [8] and [6], they assume the reference point to be zero, i.e., take the status quo as reference. However, many evidences imply different possibilities, e.g., as suggested by Heath et al. [2], that goals that serve as reference points are quite appropriate and can explain lots of empirical results. Taking into consideration a non-zero reference point, Zhao and Geng [13] show that prospect theory can satisfactorily predict the pull-to-center effect through numerical calculations (but no analytical results). Furthermore, Long and Nasiry [5] use a model with a decision-dependent reference point that is a specified function of order quantity. For uniform distribution of demand, they theoretically prove that the model can predict the pull-to-center effect.