Task decomposition and newsvendor decision making

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We conduct three behavioral laboratory experiments to compare newsvendor order decisions placed directly to order decisions submitted in a decomposed way by soliciting point forecasts, uncertainty estimates, and service-level decisions. Decomposing order decisions in such a way often follows from organizational structure and can lead to performance improvements compared with ordering directly. However, we also demonstrate that if the critical ratio is below 50%, or if the underlying demand uncertainty is too high, task decomposition may not be preferred to direct ordering. Under such conditions, decision makers are prone to set service levels too high or to suffer from excessive random judgment error, which reduces the efficacy of task decomposition. We further demonstrate that if accompanied by decision support in the form of suggested quantities, task decomposition becomes the better-performing approach to newsvendor decision making more generally. Decision support and task decomposition therefore appear as complementary methods to improve decision performance in the newsvendor context.
Publisher
INFORMS
Issue Date
2017-10
Language
English
Article Type
Article
Keywords

DIVIDE-AND-CONQUER; JUDGMENTS; INFORMATION; PRINCIPLE; BEHAVIOR; MODELS; UNCERTAINTY; CONSISTENCY; FREQUENCY; ACCURACY

Citation

MANAGEMENT SCIENCE, v.63, no.10, pp.3226 - 3245

ISSN
0025-1909
DOI
10.1287/mnsc.2016.2521
URI
http://hdl.handle.net/10203/227079
Appears in Collection
MT-Journal Papers(저널논문)
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