An Experimental Study Of Inventory Strategy Under Demand Substitution

As the rapid development of economy,science and technology,there is a growing number of products with similar functions and short life cycle.In order to meet the diverse needs of consumers and improve economic returns,retailers are often selling a variety of similar products with different brands.Demand substitution will inevitably exist between the similar products,which to some extent increased the difficulty of inventory management.The theory of behavioral inventory management holds that people are bounded rationally.In the face of uncertainty and complex decision-making,managers' irrational behavior is more obvious,leading to decision-making results deviating from theoretical optimal values,then,decision bias is generated.Therefore,this paper studied the inventory strategy of centralized management of substitutable products under the demand substitution from the aspects of behavior,which has a guiding significance to reality.Most researches of behavioral inventory management are carried out through newsvendor experiment,and newspaper is single-period inventory which conforms to the research background with short life cycle products.Therefore,this paper also studied inventory strategy under demand substitution based on the newsvendor problem through laboratory experiment.And,the inventory strategy under the newsboy problem mainly refers to the decision of the order quantity,so this paper also mainly researched the order decisions of the subjects.Many researchers in their experiments found that the order quantities of subjects deviated from the optimal order quantity and moved closer to the mean of the demand(pull-to-center effect),and they found the mean anchor heuristic,the demand-chasing heuristic and the preference for minimizing ex-post inventory error can give the phenomenon a better explanation.Therefore,this paper also analyzed the order decisions of the subjects and tried to explain the order behavior of the subjects from the heuristic point of view.General experimental studies of the newsvendor problem are carried out under the condition of demand feedback,In order to reflect the actual situation and make comparison,this study also carried out a newsvendor experiment under the sales feedback.When feedback with sales,sales become the main reference point of the subjects,so this study followed the demand chasing model and analyzed the sales chasing behavior of the subjects.In addition,taking account of the impact of demand substitution on the subjects,this paper also researched themoderation effect of the feedback of the substitutable product on the order decisions of the subjects.Last,this paper analyzed the behavior of learning of the subjects under demand substitution.The main results are as follows:(1)Order decisions: Under the two feedback conditions,the order quantities of low-margin products are slightly higher than the high-margin products,and there is no significant difference between them.The order quantities of two products both deviated from the optimal order quantity and moved closer to the expected demand.Under the same feedback condition,the standard deviation of order quantities has no significant difference between two products.The order quantities and the standard deviation of order quantities under the sales feedback are significantly less than the situation under the demand feedback.(2)Heuristics: The order decisions of the subjects are affected by the mean anchor heuristic,the demand-chasing heuristic,and the sales-chasing heuristic.Under the demand feedback,the demand chasing behavior is stronger than the sales chasing behavior.And under the sales feedback,the sales chasing behavior is stronger than the demand chasing behavior.In addition,the mean anchoring behavior of high-margin product is relatively stronger,and the chasing behavior of feedback of low-margin product is relatively stronger.(3)Moderation effect of the substitutable product: The supply and demand situation of high-margin product has opposite moderation effect on the demand chasing behavior of low-margin product.When the high-margin product is oversupply,the demand chasing behavior of low-margin product is stronger.The sales situation of high-margin product has positive moderation effect on the sales chasing behavior of low-margin product.When the surplus quantities of high-margin product are large,the sales chasing behavior of low-margin product is weaker.(4)Learning behavior: The order quantity of the high-margin product will approach its optimal order quantity as the increase in the number of orders,and the situation of low-margin product is just opposite.There is no tendency of both two products to decrease their variability of order quantities.