Volume 55, Number 3, May-June 2021
|Page(s)||1325 - 1341|
|Published online||01 June 2021|
Optimal decision in MC supply chain with overconfident retailer based on the newsvendor model
School of Management, Hefei University of Technology, Hefei 230009, P.R. China
2 Key Laboratory of Process Optimization and Intelligent Decision-making, Ministry of Education, Hefei 230009, P.R. China
* Corresponding author: email@example.com
Accepted: 7 April 2021
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.
Mathematics Subject Classification: 90B05 / 97M40
Key words: Overconfidence / mass customization / newsvendor model / decision analysis
© EDP Sciences, ROADEF, SMAI 2021
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