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Inventory Sharing And Demand-Side Underweighting, Hui Zhao, Liang Xu, Enno Siemsen

Department of Supply Chain Management and Analytics: Faculty and Staff Publications

Problem definition: Transshipment/inventory sharing has been used in practice because of its risk-pooling potential. However, human decision makers play a critical role in making inventory decisions in an inventory sharing system, which may affect its benefits. We investigate whether the opportunity to transship inventory influences decision makers’ inventory decisions and whether, as a result, the intended risk-pooling benefits materialize.

Academic/practical relevance: Previous research in transshipment, which is focused on finding optimal stocking and sharing decisions, assumes rational decision making without any systematic bias. As one of the first to study inventory sharing from a behavioral perspective, …