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Transshipment Between Overconfident Newsvendors

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  • Jialu Li
  • Meng Li
  • Xuan Zhao

Abstract

This study investigates the impacts of transshipment between overconfident newsvendors who perceive the expected outcome of a random event as more certain than it actually is. The conventional wisdom is that transshipment is a risk‐pooling strategy for improving newsvendors’ performance. However, we find that overconfident newsvendors can be worse off with transshipment as compared to without transshipment. This result remains when overconfident newsvendors possess other behaviors such as fairness, demand‐ and supply‐side thinking, loss aversion, and demand anchoring. We also utilize data from controlled experiments to demonstrate that overconfidence is a robust behavior with transshipment.

Suggested Citation

  • Jialu Li & Meng Li & Xuan Zhao, 2021. "Transshipment Between Overconfident Newsvendors," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 2803-2813, September.
    • Handle: RePEc:bla:popmgt:v:30:y:2021:i:9:p:2803-2813
    DOI: 10.1111/poms.13424
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    References listed on IDEAS

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    Cited by:

    1. Jammernegg, Werner & Kischka, Peter & Silbermayr, Lena, 2022. "Heterogeneity, asymmetry and applicability of behavioral newsvendor models," European Journal of Operational Research, Elsevier, vol. 301(2), pages 638-646.
    2. Qingren He & Taiwei Shi & Botao Liu & Wanhua Qiu, 2022. "The Ordering Optimization Model for Bounded Rational Retailer with Inventory Transshipment," Mathematics, MDPI, vol. 10(7), pages 1-16, March.
    3. Choi, Tsan-Ming & Zhang, Ting, 2023. "Will being an angel bring more harm than good? Altruistic newsvendors with different risk attitudes," European Journal of Operational Research, Elsevier, vol. 305(3), pages 1153-1165.

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