Perceived versus actual value of product substitution flexibility: An experimental investigation

Bansal, Saurabh; Moritz, Brent

doi:10.1016/j.jom.2015.08.001

Cited by 12 publications

(6 citation statements)

References 75 publications

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“…We refer interested readers to Malhotra and Mackelprang (2012) for a review of the supply chain flexibility literature. While several researchers have looked at the effect of information sharing, lead time, training, production smoothing, coordination, and individual behavioral traits on BWE, very few manufacturing flexibility-oriented studies, with the exception of Bansal and Moritz (2015), have utilized behavioral research using lab or field experiments. They showed that participants usually overestimate the value of flexibility when applied to product substitutions in a behavioral experiment setting.…”

Section: Flexibility Within and Across Firmsmentioning

confidence: 99%

System Performance Implications of Capacity and Flexibility Constraints on Bullwhip Effect in Supply Chains

2021

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Utilizing behavioral experiments involving approximately one thousand subjects, we empirically evaluate the relationship between volume flexibility and the Bullwhip Effect (BWE). We not only evaluate differences in the level of BWE, but also differences in associated system performance. We find that systems with hard capacity constraints are effective at limiting BWE, but also produce very poor customer service levels. However, systems with low levels of volume flexibility generate similar performance as fully flexible systems but do so while also generating a lower BWE. In a multi-echelon setting, we show that having partial volume flexibility at the upstream echelon helps in reducing order variance, with no significant drop in service level in the supply chain. This is particularly useful in those manufacturing environments which prefer stable orders for production planning without affecting the downstream customer service level. Counterintuitively, both experiments uncovered instances of irrational behavior where participants invoked flexibility in ways that did not always enhance system performance. In addition, these experiments also established enhancements in BWE and system performance through introduction of incremental volume flexibility into upstream echelon of a supply chain.

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Section: Flexibility Within and Across Firmsmentioning

confidence: 99%

System Performance Implications of Capacity and Flexibility Constraints on Bullwhip Effect in Supply Chains

2021

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“…Among studies on capacity management, a nascent research stream is behavioral issues in allocating capacity. Examples of articles in this research stream include capacity management in the assignment of arriving jobs with fairness concerns (Geng, Huh, & Nagarajan, ), retailer's perception bias while experiencing supply shortage (Chen & Zhao, ), and overestimation of monetary value of substituting products in the presence of demand and operational uncertainties (Bansal & Moritz, ). Other examples are focused more on supply‐side dynamics, and include studies of supplier capacity allocation to customers with past recollection of service capacity (Adelman & Mersereau, ), supplier behavior under capacity investment competition (Hu, Wan, Ye, & Chi, ), and bounded rationality among supply chain members in allocating capacity (Chen, Su, & Zhao, ).…”

Section: Literature Classification Based On Operations Contextsmentioning

confidence: 99%

Behavioral Operations and Supply Chain Management–A Review and Literature Mapping

et al. 2019

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Behavioral operations research has proliferated greatly over the decade since its first formal review in 2006. The growth of the field warrants an objective mapping of contributions to the literature and the identification of trends. We conduct a systematic review of the literature of behavioral operations and supply chain management (BOSCM) across eight key operations and supply chain management journals, with publication dates through the end of June 2018. Collected articles are categorized into 12 operations contexts as well as emerging topic considerations. Key research trends, theoretical foundations, and methodological choices are discussed in each context. The results show that supply chain management, inventory management, and procurement/auctions have been the most popular operations contexts for BOSCM researchers. The results of our co‐citation analysis shows that the fundamental research areas that have informed and shaped the field include supply chain risk management, marketing, cognitive psychology, and social psychology. Based on these findings and a survey of the most prolific authors in the field, we discuss possible avenues for future research.

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“…Bansal and Moritz (2015) examine the behavioral aspects of estimating the value of product substitution and find that subjects systematically overestimate the monetary value of substitution. Bansal and Moritz (2015) examine the behavioral aspects of estimating the value of product substitution and find that subjects systematically overestimate the monetary value of substitution.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Our paper is also related to studies of product substitution. Bansal and Moritz (2015) examine the behavioral aspects of estimating the value of product substitution and find that subjects systematically overestimate the monetary value of substitution. Wan et al (2018) investigate consumer behavior in the context of multistore multiproduct substitution with the nested logit model and exogenous substitution model, and estimate substitution probabilities with aggregate sales data.…”

Section: Literature Reviewmentioning

confidence: 99%

Pricing and introductory scarcity strategies based on consumers' response

Chen

Jia

2019

Int Trans Operational Res

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In industries such as electronics, automobiles, and luxury goods, we have observed numerous cases of intentional undersupply when a new product is introduced. Previous research has shown that introductory scarcity has a positive effect on consumers' willingness to pay, but this effect has yet to be quantified. This paper investigates how scarcity strategies affect product pricing and a firm's profits. We consider two types of scarcity strategies, a real and a fake scarcity strategy, and propose a two-period model in both markdown and markup scenarios. We find that an introductory scarcity strategy is profitable in a markup scenario only if the discount factor is greater than a critical value and payoffs are compartmentalized. Moreover, an introductory scarcity strategy could result in profits in a markdown scenario if consumers are sensitive to scarcity. However, a scarcity strategy is always detrimental to a firm with low-quality products in both scenarios. If there are uninformed consumers in the market, a fake scarcity strategy is beneficial for firms in the short term but not in the long term.

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Perceived versus actual value of product substitution flexibility: An experimental investigation

Cited by 12 publications

References 75 publications

System Performance Implications of Capacity and Flexibility Constraints on Bullwhip Effect in Supply Chains

System Performance Implications of Capacity and Flexibility Constraints on Bullwhip Effect in Supply Chains

Behavioral Operations and Supply Chain Management–A Review and Literature Mapping

Pricing and introductory scarcity strategies based on consumers' response

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