| The main objective of this research was to determine the influence of risk and uncertainty on logistics decision making. Using the basic concepts of prospect theory, the research extended the theory in an attempt to explain decision making under realistic business conditions. The influence of uncertainty in trade-off decisions where both positive and negative values were present in the same alternative had not been previously researched.;The results of the research showed that the objective given to the decision maker interacted with cost, cost uncertainty and service uncertainty to influence the evaluation of the cost-service trade-off. Uncertainty for cost savings and/or service improvement was less desirable than certainty, consistent with prospect theory. When both elements of the trade-off were negative, however, the uncertainty failed to significantly influence the evaluations of the alternative. The form of the uncertainty was also found to influence the evaluation through interactions with other variables.;The research used six independent variables in a mixed experimental design. The independent variables included cost, customer service, cost uncertainty, service uncertainty, crossover, and objective. Dependent variables included a rating of the acceptability of the alternative, an accept/reject variable and the expected profit if the alternative was accepted. Logistics undergraduate and graduate students (n = 114) and logistics managers (n = 30) participated in the research. |
