Premium
Does Forecast‐Accuracy‐Based Allocation Induce Customers to Share Truthful Order Forecasts?
Author(s) -
Pekgün Pelin,
Park Minseok,
Keskinocak Pınar,
Janakiram Mani
Publication year - 2019
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/poms.13066
Subject(s) - order (exchange) , supply chain , demand forecasting , key (lock) , computer science , lead time , operations research , business , microeconomics , marketing , economics , finance , computer security , engineering
Through a behavioral study, we investigate buyers’ strategic order forecasting behavior in a multi‐period setting under a forecast accuracy‐based allocation policy, where the supplier allocates (proportionally) more inventory to the buyer with the better order forecast accuracy in case of scarce supply. We developed an interactive game that simulates a supply chain in which one supplier sells a key component to two buyers, who in turn sell to consumers. In each period, buyers share forecasts of future orders with their supplier. The participants in the game play the role of a buyer, while the supplier is automated. Our experimental findings suggest that rewarding forecast accuracy in allocating inventory can significantly improve the order forecast accuracy of the buyers and reduce their forecast inflation behavior. Interestingly, even without communication of the policy, buyers learn over time that more accurate forecasts lead to better service from their supplier and improve their order forecast accuracy.