The Distributionally Robust Inventory Strategy of the Overconfident Retailer under Supply Uncertainty

To factor in the retailer’s overconfidence when dealing with inventory problem supply uncertainty, this paper develops a distributionally robust optimization model by only considering mean and variance of yield rate distribution. We first show that would prompt retailer to order more under low-profit conditions, whereas it reduces quantity high-profit conditions. The analysis results imply pull-to-center effect still exists uncertainty applies, asymmetry deviation is higher conditions proved. performance also characterized expected profits both supplier. Numerical studies even though may suffer losses, supplier can benefit from case, which positively increase joint profit chain. Two extensions base are considered, including scenario demand uncertainties an overconfident multi-product budget constraints. This research provides tractable predict how decision-maker biased, such insights help applications de-biasing techniques practice.