Behavioral Inventory Management

Abstract

Behavioral inventory-management research leverages ideas and methodologies commonly used in behavioral economics and psychology to advance our understanding of the role of human behavior in inventory management. In this chapter, we first review some of the early papers in this area organized by problem setting. We describe the history and notable papers in the two largest streams: the newsvendor and serial supply chain settings. We then discuss how behavioral science can advance inventory research by describing three different pathways for improving inventory performance: correcting sub-optimal decision behavior, responding to others’ behavioral patterns, and designing processes and systems for behavioral regularities. For each pathway, we provide recent examples from the literature. We conclude by discussing contemporary research opportunities in this sub-field involving other types of human decisions, beyond the inventory decisions typically considered.