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The Handbook of Behavioral Operations

The Handbook of Behavioral Operations

Karen Donohue (Editor), Elena Katok (Editor), Stephen Leider (Editor)

ISBN: 978-1-119-13834-1

Sep 2018

656 pages

Description

A comprehensive review of behavioral operations management that puts the focus on new and trending research in the field

The Handbook of Behavioral Operations offers a comprehensive resource that fills the gap in the behavioral operations management literature. This vital text highlights best practices in behavioral operations research and identifies the most current research directions and their applications. A volume in the Wiley Series in Operations Research and Management Science, this book contains contributions from an international panel of scholars from a wide variety of backgrounds who are conducting behavioral research.

The handbook provides succinct tutorials on common methods used to conduct behavioral research, serves as a resource for current topics in behavioral operations research, and as a guide to the use of new research methods. The authors review the fundamental theories and offer frameworks from a psychological, systems dynamics, and behavioral economic standpoint. They provide a crucial grounding for behavioral operations as well as an entry point for new areas of behavioral research. The handbook also presents a variety of behavioral operations applications that focus on specific areas of study and includes a survey of current and future research needs. This important resource:

  • Contains a summary of the methodological foundations and in-depth treatment of research best practices in behavioral research.
  • Provides a comprehensive review of the research conducted over the past two decades in behavioral operations, including such classic topics as inventory management, supply chain contracting, forecasting, and competitive sourcing.
  • Covers a wide-range of current topics and applications including supply chain risk, responsible and sustainable supply chain, health care operations, culture and trust.
  • Connects existing bodies of behavioral operations literature with related fields, including psychology and economics.
  • Provides a vision for future behavioral research in operations.

Written for academicians within the operations management community as well as for behavioral researchers, The Handbook of Behavioral Operations offers a comprehensive resource for the study of how individuals make decisions in an operational context with contributions from experts in the field.

List of Contributors xvii

Part I Methodology 1

1 Designing and Conducting Laboratory Experiments 3
Elena Katok

1.1 Why Use Laboratory Experiments? 3

1.2 Categories of Experiments 5

1.3 Some Prototypical Games 8

1.4 Established Good Practices for Conducting BOM Laboratory 12

1.5 Incentives 20

1.6 Deception 24

1.7 Collecting Additional Information 26

1.8 Infrastructure and Logistics 28

References 29

2 Econometrics for Experiments 35
Kyle Hyndman and Matthew Embrey

2.1 Introduction 35

2.2 The Interaction Between Experimental Design and Econometrics 37

2.3 Testing Theory and Other Hypotheses: Classical Hypothesis Testing 42

2.4 Testing Theory and Other Hypotheses: Regression Analysis 52

2.5 Dependence of Observations 63

2.6 Subject Heterogeneity 68

2.7 Structural Estimation 71

2.8 Concluding Remarks 80

Acknowledgments 84

References 84

3 Incorporating Behavioral Factors into Operations Theory 89
Tony Haitao Cui and Yaozhong Wu

3.1 Types of Behavioral Models 90

3.2 Identifying Which Behavioral Factors to Include 100

3.3 Nesting the Standard Model 106

3.4 Developing Behavioral Operations Model 110

3.5 Modeling for Testable Predictions 114

References 115

4 Behavioral Empirics and Field Experiments 121
Maria R. Ibanez and Bradley R. Staats

4.1 Going to the Field to Study Behavioral Operations 121

4.2 Analyzing the Data: Common Empirical Methods 126

4.3 Field Experiments (Creating the Data) 133

4.4 Conclusion: The Way Forward 140

References 141

Part II Classical Approaches to Analyzing Behavior 149

5 Biases in Individual Decision]Making 151
Andrew M. Davis

5.1 Introduction 151

5.2 Judgments Regarding Risk 154

5.3 Evaluations of Outcomes 169

5.4 Bounded Rationality 184

5.5 Final Comments and Future Directions 191

Acknowledgments 193

References 193

6 Other]regarding Behavior: Fairness, Reciprocity, and Trust 199
Gary E. Bolton and Yefen Chen

6.1 Introduction 199

6.2 The Nature of Social Preferences 201

6.3 Models of Social Preferences 208

6.4 Fair Choice: Stability and Factors That Influence It 214

6.5 Reciprocal Choice 222

6.6 Trust and Trustworthiness 226

6.7 Summary: The Empirical Nature of Fair Choice 227

References 229

7 Behavioral Analysis of Strategic Interactions: Game Theory, Bargaining, and Agency 237
Stephen Leider

7.1 Behavioral Game Theory 238

7.2 Behavioral Analysis of Principal–Agent Problems 253

7.3 Bargaining 264

References 273

8 Integration of Behavioral and Operational Elements Through System Dynamics 287
J. Bradley Morrison and Rogelio Oliva

8.1 Introduction 287

8.2 Decision]making in a Dynamic Environment 289

8.3 Principles (Guidelines) for Modeling Decision]making 293

8.4 Grounded Development of Decision]making Processes 298

8.5 Formulation Development and Calibration Example 304

8.6 Conclusion 313

References 316

Part III Applications within Operations Management 323

9 Behavioral Foundations of Queueing Systems 325
Gad Allon and Mirko Kremer

9.1 Introduction and Framework 325

9.2 The Customer 327

9.3 The Server 338

9.4 The Manager 343

9.5 Testing Queueing Theory in the Laboratory 353

9.6 Conclusions and Future Research Opportunities 356

References 359

10 New Product Development and Project Management Decisions 367
Yael Grushka]Cockayne, Sanjiv Erat, and Joel Wooten

10.1 Exploration: The Creative Process 368

10.2 Plan: From Creative to Reality 376

10.3 Execute: From Planning to Execution 382

10.4 Conclusions 385

References 387

11 Behavioral Inventory Decisions: The Newsvendor and Other Inventory Settings 393
Michael Becker]Peth and Ulrich W. Thonemann

11.1 Introduction 393

11.2 Nominal and Actual Order Quantities 394

11.3 Decision Biases 396

11.4 Utility Functions 411

11.5 Individual Heterogeneity 418

11.6 Other Inventory Models 422

11.7 Summary and Outlook 425

Acknowledgments 427

References 427

12 Forecast Decisions 433
Paul Goodwin, Brent Moritz, and Enno Siemsen

12.1 An Introduction to Forecasting Behavior 433

12.2 Judgment Biases in Point Forecasting 438

12.3 Judgment Biases in Forecasting Uncertainty 442

12.4 Organizational Forecasting Processes 443

12.5 Improving Judgmental Forecasting 445

12.6 Conclusion and Future Research Opportunities 452

References 453

13 Buyer–Supplier Interactions 459
Kay]Yut Chen and Diana Wu

13.1 Introduction 459

13.2 Coordination with Imperfect Information: The Beer Distribution Game 460

13.3 Relationships Under Incentive Conflicts: Contracting in Supply Chains 468

13.4 Contracting and Mechanism Design 480

13.5 Conclusion and Future Possibilities 482

References 484

14 Trust and Trustworthiness 489
Özalp Özer and Yanchong Zheng

14.1 Are There Any Business Case Studies Where Trust and Trustworthiness Matter? 490

14.2 What Is Trust? 494

14.3 What Is Trustworthiness? 496

14.4 How Can We Measure Trust and Trustworthiness? 498

14.5 What Are the Building Blocks of Trust and Trustworthiness? 504

14.6 Two Remarks on Research Methods (Optional) 509

14.7 Conclusion 512

Appendix 14.A A Selected Overview of Additional Decision

Games for Studying Trust 515

References 519

15 Behavioral Research in Competitive Bidding and Auction Design 525
Wedad Elmaghraby and Elena Katok

15.1 Overview of Behavioral Operations Research on Auctions 525

15.1.1 Auction Basics 526

15.2 What We Learned from Experimental Economics Literature on Forward Auctions 527

15.3 Buyer]determined Auctions 530

15.4 Relationships and Moral Hazard in Auctions 532

15.5 Empirical Findings on Bidder Behavior, Judgment, and Decisionmaking Bias 534

15.6 Supply Risk 542

15.7 Elements of Auction Design 543

15.8 Comparing and Combining Auctions with Negotiations 547

15.9 Ongoing and Future Directions 550

References 552

16 Strategic Interactions in Transportation Networks 557
Amnon Rapoport and Vincent Mak

16.1 Introduction 557

16.1.1 Basic Notions and Chapter Organization 558

16.2 Experiments on Route Choice in Networks with Fixed Architecture 559

16.3 Experiments on Traffic Paradoxes 564

16.4 Experiments on the Pigou–Knight–Downs Paradox 565

16.5 Experiments on the Downs–Thomson Paradox 568

16.6 Experiments on the Braess Paradox 569

16.7 Discussion and Conclusions 579

Acknowledgment 581

References 581

17 Incorporating Customer Behavior into Operational Decisions 587
Anton Ovchinnikov

17.1 How to Think About “Behaviors” in Operational Settings: Customer Journey Maps 588

17.2 The “Before” Behaviors 591

17.3 The “During” Behaviors 596

17.4 The “After” Behaviors 607

17.5 Concluding Remarks 612

References 612

18 The Future Is Bright: Recent Trends and Emerging Topics in Behavioral Operations 617
Karen Donohue and Kenneth Schultz

18.1 Introduction 617

18.2 Current Research Trends 618

18.3 Emerging Behavioral Operations Topics 625

18.4 Final

Remarks 641

Acknowledgment 643

References 643

Index