Demand Forecasting Behavior: System Neglect and Change Detection

Kremer, Mirko; Moritz, Brent; Siemsen, Enno

doi:10.1287/mnsc.1110.1382

Cited by 116 publications

(81 citation statements)

References 61 publications

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“…4 There is more evidence that newsvendor behavior is driven by cognitive limitations. A study by Kremer et al (2011) suggests that judgmental time-series forecasting place too much emphasis to signals they receive relative to the system that generates the signals. Bolton et al (2012) show that if newsvendors are told the optimal solution, they are much closer to the optimum.…”

Section: Resultsmentioning

confidence: 99%

Impulse Balance and Multiple‐Period Feedback in the Newsvendor Game

Ockenfels

Selten²

2015

Production and Operations Management

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Human subjects in the newsvendor game place suboptimal orders: orders are typically between the expected profit‐maximizing quantity and mean demand (“pull‐to‐center bias”). In previous work, we have shown that impulse balance equilibrium (IBE), which is based on a simple ex post rationality principle along with an equilibrium condition, can predict ordering decisions in the laboratory. In this study, we extend IBE to standing orders and multiple‐period feedback and show that it predicts—in line with previous findings—that constraining newsvendors to make a standing order for a sequence of periods moves the average of submitted orders toward the optimum.

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Section: Resultsmentioning

confidence: 99%

Impulse Balance and Multiple‐Period Feedback in the Newsvendor Game

Ockenfels

Selten²

2015

Production and Operations Management

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“…Both Bendoly, Donohue and Schultz (2006) and Gino and Pisano (2008) provide reviews of this literature. Biased decision making -decisions that deviate from the rational choice have been shown in numerous operational domains such as forecasting (Kremer, Moritz and Siemsen 2011), contracting (Davis, Katok and Santamaría 2014) and inventory management (Schweitzer and Cachon 2000). Perhaps most related to our work is research by Amar et al (2011) that shows individuals may pay back smaller, lower interest debts, rather than portions of larger, higher interest debts, in order to close out or 'complete' the smaller debts.…”

Section: Literature Reviewmentioning

confidence: 97%

Task Selection and Workload: A Focus on Completing Easy Tasks Hurts Long-Term Performance

Staats

Kouchaki

et al. 2017

SSRN Journal

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How individuals manage, organize, and complete their tasks is central to operations management. Recent research in operations focuses on how under conditions of increasing workload individuals can increase their service time, up to a point, in order to complete work more quickly. As the number of tasks increases, however, workers may also manage their workload by a different process -task selection. Drawing on research on workload, individual discretion, and behavioral decision making we theorize and then test that under conditions of increased workload individuals may choose to complete easier tasks in order to manage their load. We label this behavior Task Completion Bias (TCB). Using two years of data from a hospital emergency department we find support for TCB and also show that it improves shortterm productivity. However, although it improves performance in the short-term we find that an overreliance on this task selection strategy hurts performance -as measured both by speed and revenue -in the long run. We then turn to the lab to replicate conceptually the task selection effect and show that it occurs due to the positive feelings individuals get from task completion. These findings provide an alternative mechanism for the workload-speedup effect from the literature. We also discuss implications for both research and the practice of operations in building systems to help people succeed in both the short and long run.

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“…Chen and Mersereau (2015) provide a review and history of this literature, including both Bayesian and nonparametric approaches. Nevertheless, in practice, the forecasting task frequently requires managerial judgment (see Fildes and Goodwin 2007, Kremer et al 2011, Schweitzer and Cachon 2000. While not uniformly better, managers generally provide positive value, for example, they have information which the system does not (Fildes et al 2009).…”

Section: Remedying the Censorship Biasmentioning

confidence: 99%

“…Nevertheless, in practice, the forecasting task frequently requires managerial judgment (see Fildes and Goodwin , Kremer et al. , Schweitzer and Cachon ). While not uniformly better, managers generally provide positive value, for example, they have information which the system does not (Fildes et al.…”

Section: Introductionmentioning

confidence: 99%

A Behavioral Remedy for the Censorship Bias

Tong

Feiler

Larrick³

2018

Production and Operations Management

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Existing evidence suggests that managers exhibit a censorship bias: demand beliefs tend to be biased low when lost sales from stockouts are unobservable (censored demand) compared to when they are observable (uncensored demand). We develop a non‐constraining, easily implementable behavioral debias technique to help mitigate this tendency in demand forecasting and inventory decision‐making settings. The debiasing technique has individuals record estimates of demand outcomes (REDO): participants explicitly record a self‐generated estimate of every demand realization, allowing them to record a different value than the number of sales in periods with stockouts. In doing so, they construct a more representative sample of demand realizations (that differs from the sales sample). In three laboratory experiments with MBA and undergraduate students, this remedy significantly reduces downward bias in demand beliefs under censorship and leads to higher inventory order decisions.

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Demand Forecasting Behavior: System Neglect and Change Detection

Cited by 116 publications

References 61 publications

Impulse Balance and Multiple‐Period Feedback in the Newsvendor Game

Impulse Balance and Multiple‐Period Feedback in the Newsvendor Game

Task Selection and Workload: A Focus on Completing Easy Tasks Hurts Long-Term Performance

A Behavioral Remedy for the Censorship Bias

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