In this paper, we analyze the optimal order-quantity decisions in a supply chain with mass customization (MC) manufacturer and overconfident retailers. First, we consider a newsvendor model in which an unbiased retailer sells mass customized products. The retailer needs to make order quantity decisions before the selling season. Meanwhile, the supplier is a mass customization manufacturer and implements modular production. The supply process is uncertain, as the real quantity the retailer received is the order quantity multiplied by a random yield rate. Second, two overconfident models are considered and theorems are proposed. In the first model, the behavioral bias of overconfidence only affects the retailer’s judgment of variance of market demand. In the second model, the behavior bias of overconfidence affects not only the retailer’s cognition of the variance of market demand, but also his cognition of the expectation of market demand. In addition, the relationship between the optimal decisions and the modularity level is obtained. Finally, we provide managerial insights for the decision makers of the retailers and the manufacturers on order quantity and modularity level, respectively.
Keywords: Overconfidence, mass customization, newsvendor model, decision analysis
@article{RO_2021__55_3_1325_0,
author = {Cheng, Bayi and Li, Ruofan and Zhu, Xiaoxi and Zhou, Mi and Cao, Xiongfei},
title = {Optimal decision in {MC} supply chain with overconfident retailer based on the newsvendor model},
journal = {RAIRO. Operations Research},
pages = {1325--1341},
year = {2021},
publisher = {EDP-Sciences},
volume = {55},
number = {3},
doi = {10.1051/ro/2021060},
mrnumber = {4266218},
zbl = {1468.90010},
language = {en},
url = {https://www.numdam.org/articles/10.1051/ro/2021060/}
}
TY - JOUR AU - Cheng, Bayi AU - Li, Ruofan AU - Zhu, Xiaoxi AU - Zhou, Mi AU - Cao, Xiongfei TI - Optimal decision in MC supply chain with overconfident retailer based on the newsvendor model JO - RAIRO. Operations Research PY - 2021 SP - 1325 EP - 1341 VL - 55 IS - 3 PB - EDP-Sciences UR - https://www.numdam.org/articles/10.1051/ro/2021060/ DO - 10.1051/ro/2021060 LA - en ID - RO_2021__55_3_1325_0 ER -
%0 Journal Article %A Cheng, Bayi %A Li, Ruofan %A Zhu, Xiaoxi %A Zhou, Mi %A Cao, Xiongfei %T Optimal decision in MC supply chain with overconfident retailer based on the newsvendor model %J RAIRO. Operations Research %D 2021 %P 1325-1341 %V 55 %N 3 %I EDP-Sciences %U https://www.numdam.org/articles/10.1051/ro/2021060/ %R 10.1051/ro/2021060 %G en %F RO_2021__55_3_1325_0
Cheng, Bayi; Li, Ruofan; Zhu, Xiaoxi; Zhou, Mi; Cao, Xiongfei. Optimal decision in MC supply chain with overconfident retailer based on the newsvendor model. RAIRO. Operations Research, Tome 55 (2021) no. 3, pp. 1325-1341. doi: 10.1051/ro/2021060
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