The Effect of Multiple Reference Points and Prior Gains and Losses on Managers′ Risky Decision Making

Sullivan, Kathryn; Kida, Thomas

doi:10.1006/obhd.1995.1091

Cited by 111 publications

(69 citation statements)

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“…Sullivan and Kida (1995) note that individuals evaluate alternatives relative to an outcome reference to estimate gains and losses. Outcomes preferable to a reference outcome are gains; those less desirable than the reference outcome are losses (Yates and Stone, 1992a;Lopes, 1987).…”

Section: Literature Reviewmentioning

confidence: 99%

Buyer perceptions of supply disruption risk: A behavioral view and empirical assessment

Ellis

Henry

Shockley

2009

J of Ops Management

297

283

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As supply chains become more complex, firms face increasing risks of supply disruptions. The process through which buyers make decisions in the face of these risks, however, has not been explored. Despite research highlighting the importance of behavioral approaches to risk, there is limited research that applies these views of risk in the supply chain literature. This paper addresses this gap by drawing on behavioral risk theory to investigate the causal relationships amongst situation, representations of risk, and decision‐making within the purchasing domain. We operationalize and explore the relationship between three representations of supply disruption risk: magnitude of supply disruption, probability of supply disruption, and overall supply disruption risk. Additionally, we draw on exchange theories to identify product and market factors that impact buyers’ perceptions of the probability and magnitude of supply disruption. Finally, we look at how representations of risk affect the decision to seek alternative sources of supply. We test our model using data collected from 223 purchasing managers and buyers of direct materials. Our results show that both the probability and the magnitude of supply disruption are important to buyers’ overall perceptions of supply disruption risk. We also find that product and market situational factors impact perceptions of risk, but they are best understood through their impact on perceptions of probability and magnitude. Finally, we find that decisions are based on assessments of overall risk. These findings provide insight into the decision‐making process and show that all three representations of risk are necessary for fully understanding risky decision‐making with respect to supply disruptions.

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Section: Literature Reviewmentioning

confidence: 99%

Buyer perceptions of supply disruption risk: A behavioral view and empirical assessment

Ellis

Henry

Shockley

2009

J of Ops Management

297

283

View full text Add to dashboard Cite

show abstract

“…while the research based on multi-reference point is researched in some economic and management field, like Sullivan and Kida (1995) [24] propose multiple points of reference are important determinants of risky behavior in many decision contexts through situational experiments, we cannot explain the mechanism of multiple points of reference in the stochastic demand.…”

Section: Related Newsvendor Literaturementioning

confidence: 98%

“…"Regret Theory" emphasizes there is a choice because there is no other program which led to the "regret function". If the result is better than the other possible outcomes, the individual will produce a sense of joy, otherwise will regret it [24]. Kahneman and Tversky (1979) and other papers all emphasize the importance of status quo reference point and ignore other reference points.…”

Section: Related Newsvendor Literaturementioning

confidence: 99%

The Newsvendor Problem Based on Multiple Reference Points

Zhou¹

2016

JSS

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This article will introduce the minimum requirement and the statue quo reference points into newsvendor model. Then the problem of decision bias can be well explained through researching multiple reference points. Many papers confirm the loss aversion is one of the important factors in the decision-making bias and plays an important role in ordering decisions. We propose crossing failure is more important than the loss aversion depending on the decision maker's degree of the aversion. In this note, we present situation where minimum requirement and status quo reference point impact the order decision and give a breakthrough in the study of multiple reference points of newsvendor problem.

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“…For experimental evidence see Sullivan and Kida, 1995, Ordóñez et al, 2000, Koop and Johnson, 2010 We thus assume v(x; r, s) = u(x − r) + g(x − s), where both u(·) and g(·) are increasing in x and g(·) is concave in social gain (x > s) and convex in social loss (x < s). Let…”

mentioning

confidence: 99%

Social comparison and risk taking behavior

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper studies the effects of social comparison on risk taking behavior. In our framework, decision makers evaluate the consequences of their choices as changes with respect to both their own and their peers' conditions. We test experimentally whether different positions in the social ranking determine different risk attitudes. Subjects interact in a simulated workplace environment, where they receive possibly different wages as compensation for effort and then undertake a risky decision that may give them an extra gain. We find that social comparison matters for risk attitudes. In addition, risk aversion decreases with the size of social gains. As a consequence, subjects are less risk averse in social loss than in small social gain, whereas their risk attitudes do not differ between social loss and large social gain. Terms of use: Documents in

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The Effect of Multiple Reference Points and Prior Gains and Losses on Managers′ Risky Decision Making

Cited by 111 publications

References 0 publications

Buyer perceptions of supply disruption risk: A behavioral view and empirical assessment

Buyer perceptions of supply disruption risk: A behavioral view and empirical assessment

The Newsvendor Problem Based on Multiple Reference Points

Social comparison and risk taking behavior

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