Journal of Purchasing and Supply Management 26 (2020) 100646

Contents lists available at ScienceDirect

Journal of Purchasing and Supply Management

journal homepage: www.elsevier.com/locate/pursup

Risk aversion in the supply chain: Evidence from replenishment decisions T

a,∗ a b a
Carmela Di Mauro , Alessandro Ancarani , Florian Schupp , Giulia Crocco
a
DICAR, University of Catania, Viale A. Doria 6, Catania, Italy
b
Schaeffler Industries, Industriestrasse 3, Buhl, Germany

ARTICLE INFO ABSTRACT

Keywords: This study investigates the impact of individual risk aversion on replenishment decisions in a multi-echelon
Supply chain supply chain, and explores whether this impact is affected by experiential learning. The methodology applied is
Learning that of observational studies, while the multi-echelon supply chain is modeled through the classical Beer Game.
Risk aversion Participants in the study are purchasing and supply chain professionals. Results suggest that risk aversion leads
Beer game
to higher orders, Risk aversion persists even after experience of the game has been gained.

1. Introduction An overlooked behavioural aspect concerns the risk attitude of the

Due to increased competition and reduced profit margins, in many
industries working capital has become a key element of short-term fi­
nancial management (Li et al., 2019; Lind et al., 2012). The importance
of working capital has generated new interest in the problem of opti­
mization of replenishment decisions for purchased items and in the
reduction of inventory days-on-hand. Replenishment decisions must
balance the quest for cost-efficiency with the safeguard of service levels
(Jonsson and Mattson, 2006), since organizations need to guarantee
adequate service levels to customers and avoid supply chain instability
and disruptions.
Although efficiency should be guaranteed by the use of MRP and
automatic reordering systems, many companies often acknowledge that
the human factor is still an important component of replenishment
decisions, for instance through manual (i.e. human) re-planning
(Jonsson and Mattson, 2016).
Research on replenishment decisions has a long tradition at the
interface of operations, supply chain management and purchasing (Lee
et al., 1997; Sterman, 1989) and has pointed to the importance that
individual judgment and experience of the buyer or material planner
play in determining parameters such as order quantities and safety
stocks (Jonsson and Mattsson, 2006). In particular, since the seminal
study by Sterman (1989), behavioural studies of replenishment deci­
sions within the supply chain have proposed that frequently observed
behaviors such as hoarding and outcomes such as supply chain dis­
ruptions (Fahimnia et al., 2019) can be explained by the under­
weighting of goods in transit (Sterman, 1989), the use of intuitive as
opposed to analytical thinking (Narayanan and Moritz, 2015), or the
over-confidence of the decision maker (Ancarani et al., 2016).
buyer (Bendoly et al., 2006; Ghosh and Ray, 1997; Tomlin, 2006). Risk
attitudes (Pratt, 1964) are considered key individual traits that con­
tribute to determine risk taking behaviour, i.e. behaviour in contexts
characterised by lack of certainty about the outcomes of a decision
(March and Shapira, 1992; Sitkin and Pablo, 1992). In operations and
supply chain management, the standard assumption is that of “risk
neutrality”, implying that people prefer the course of action with the
highest expected return. However, past behavioural research (Rabin
and Thaler, 2001) suggests that most people dislike risk and exhibit a
risk averse attitude. Risk aversion entails that people prefer to select
options with a lower expected return in exchange for protection against
possible losses (Lopes, 1987). Another implication is that they are
willing to accept an increase in the mean cost in exchange for the re­
duction of the cost variance (Chen et al., 2007).
Analytical studies addressing the buyer-supplier dyad show that risk
aversion matters in several purchasing and supply management set­
tings. To illustrate, the risk averse buyer strictly prefers to source from a
fully reliable (but more expensive) supplier rather than from a cheaper
and less reliable one (Giri, 2011). Buyer-supplier contracts in the pre­
sence of a risk-averse party require ad hoc contractual arrangements for
risk sharing among supply chain members (Agrawal and Seshadri,
2000; Chen and Seshadri, 2006).
With respect to replenishment decisions, Cannella et al. (2019)
suggest that risk averse buyers display a hoarding behaviour when re­
plenishing purchased items, in order to reduce the risk of running out of
stock. These findings imply that risk-averse buyers suit firms whose
main goal is high customer satisfaction levels, while they may be less
desirable for firms prioritizing cost-efficiency.
Because replenishment decisions are undertaken frequently, buyers

∗
Corresponding author.
E-mail address: cdimauro@unict.it (C. Di Mauro).

https://doi.org/10.1016/j.pursup.2020.100646
Received 28 June 2019; Received in revised form 9 June 2020; Accepted 29 June 2020
Available online 01 August 2020
1478-4092/ © 2020 Elsevier Ltd. All rights reserved.
C. Di Mauro, et al.
have the opportunity to learn over time from the experience deriving
from their past decisions and from the behaviour of their customers and
suppliers (Yang et al., 2019). Although there is agreement that “ex­
periential learning” (Kolb et al., 2001) may influence risk taking be­
haviour over time, there is currently no theoretical agreement on the
direction that this learning effect will take. On the one hand, the most
credited theory in psychology on learning in risky contexts predicts that
experiential learning reduces the degree of individual risk taking
(Denrell and March 2001). On the other, alternative views (Gigerenzer,
2002) posit that experience tends to make people more confident be­
cause they learn to “live with risk”. Therefore, even risk averse buyers
should become more willing to take risks over time, once they become
more familiar with customers' and suppliers’ behaviour.
Understanding how the relation between risk aversion and risk
taking is modified by experiential learning is relevant for organizations.
For instance, if learning increases risk taking, an organization seeking
to improve its working capital management through the reduction of
inventory days-on-hand, will need to provide buyers with opportunities
for fast and effective learning. Conversely, if learning reduces risk
taking, individual incentives and de-biasing strategies may be appro­
priate.
Lack of empirical evidence on these issues motivates the present
study, which seeks to provide an answer to the following research
questions:
1 – What is the relation between the individual risk aversion of a
buyer and his degree of risk taking in replenishment decisions?
2 – How does experiential learning impact on the degree of risk taking
in replenishment decisions?
3 – Is the relation between the risk aversion attitude of the buyer and
risk taking in replenishment decisions modified by experiential
learning?
In order to answer these research questions, we undertake an ob­
servational study (Shadish et al., 2002) simulating the functioning of a
multi-echelon supply chain, in which the different echelons replenish
their inventory by ordering a single purchased item. The supply chain is
an appropriate setting for the study, because it allows analysing re­
plenishment decisions in the light of the expected behaviour of the up-
and down-stream members of the supply chain (Foerstl et al., 2017).
The study contributes to research on behavioural factors in pur­
chasing decisions in several respects. First, it provides novel evidence
that higher individual risk aversion makes buyers “prudent”, in the
sense that they avoid running out of stock by ordering more. Next, the
study explores the role of experiential learning in moderating the re­
lation between risk aversion and replenishment decisions. In particular,
the study suggests that risk averse behaviour is resilient to hands-on
experience of the decision task.
The paper is organised as follows. Section 2 reviews the relevant lit­
erature, while Section 3 develops hypotheses. The study design is set forth
in Section 4. Section 5 reports results, followed by their discussion in
Section 6. Limitations and the future research agenda conclude the paper.
2. Relevant literature background
2.1. Risk attitudes and risk taking behaviour
In risk averse individuals, the desire to avoid failure overrides the
desire to achieve good outcomes, risk neutral individuals are indifferent
to risk and select the option with the highest expected value, whereas in
risk loving individuals the desire to achieve the best possible outcome
predominates over the fear of failure (Lopes, 1987). To clarify the
concept, consider an individual who is offered the choice between ac­
cepting a gamble consisting in a gain of 100 euro if a coin lands head
and no gain if it lands tail, versus foregoing the gamble and getting 50
euro for sure. The risk averse individual would always prefer the
2
Journal of Purchasing and Supply Management 26 (2020) 100646
certainty of getting 50 euro, the risk neutral would be indifferent, and
the risk loving would prefer the gamble.
Risk aversion seems to pre-dominate in most decisions and domains
(Eckel et al., 2013; Guiso and Paiella, 2008; Koudstaal et., 2015; Rabin
and Thaler, 2001). Economics and Psychology have offered different
explanations for the determinants of risk aversion. Orthodox economic
theory posits that risk aversion stems from the maximization of a
concave utility-of-wealth function and uses this assumption ubiqui­
tously in theoretical and empirical economic research (Pratt, 1964).
Risk aversion is expected to increase with the value at stake and to be
higher for some socio-demographic categories, e.g. women (Eckel and
Grossman, 2008). Alternative behavioural theories grounded in ex­
perimental psychology have tried to explain risk aversion using two key
concepts: loss aversion and myopia (Rabin and Thaler, 2001). For in­
stance, Kahneman and Tversky's Prospect Theory (1979) uses the con­
cept of “loss aversion” to explain aversion to risk. This model argues
that decision makers evaluate changes in their wealth with respect to a
reference point. Changes perceived as losses are weighted roughly twice
as much as gains and this leads people to refuse even very small gam­
bles involving potential losses. A different standing is taken by “Mental
accounting” models (Thaler, 1999), which posit that individuals cog­
nitively store and evaluate financial transactions into separate sections
and entails that risk aversion follows from the tendency to assess risks
in isolation and therefore myopically, rather than considering the
broader financial exposure.
2.2. Learning and risk taking behaviour
Cognitive learning theories define learning as a change in the state of
knowledge due to processing of information, implying that the extent of
individual learning largely depends on information availability, selection
and elaboration (Kolb et al., 2001; Simon, 1972). In organizational set­
tings, decision makers must often rely on personally developed experi­
ence as a source of learning. In particular, experiential learning is ex­
pected to help managers learn ‘‘rules’’ for judgment (Kolb et al., 2001).
The relation between risk taking behaviour and learning remains
controversial. March (1996) showed that several standard learning
models imply that in repeated choices (implying experiential learning)
the selection of riskier choices (risk taking) decreases as the decision
maker gains experience of the task. In particular, March argues that the
reduction of risk taking behaviour through experience will be both
voluntary (the average choice reflects less risk taking) and involuntary
(the variability around the average choice decreases).
Denrell (2007) and Denrell and March (2001) explain this result
through the so called Hot Stove Effect, which builds on the asymmetric
perception of bad outcomes (which are more salient) and of good out­
comes. Since risky choices are more likely to produce bad outcomes, the
hot stove hypothesis predicts an increasing adoption of choices consistent
with the avoidance of risk. Several researchers have experimentally re­
plicated this finding (Busemeyer, 1985; Haruvy et al., 2001; Erev and
Barron, 2005). However, counter views and evidence abound. For in­
stance, the escalating commitment model (Staw and Ross, 1987) is
consistent with the view that experience can foster risky behaviour over
time. Gigerenzer (2002) argues that people “learn to live with risk” by
using heuristics rather than optimization models. Biele et al. (2009) find
that in dynamic settings the hot stove effect may be offset by a “recency”
effect, whereby recent good outcomes may increase the tendency to se­
lect riskier options. In the same vein, Bradbury et al. (2014) show that
investors shift to riskier financial products after gaining experience.
2.3. Purchasing decisions and risk attitudes
Although the empirical investigation of the impact of risk attitudes
on purchasing related decisions represents a neglected topic, some in­
sights can be gained from human experiments that have studied re­
plenishment decisions within a supply chain. Some of these studies
C. Di Mauro, et al. Journal of Purchasing and Supply Management 26 (2020) 100646

have briefly touched on the problem of risk attitudes and risk taking.
Specifically, Narayanan and Moritz (2015) investigate the impact of
intuitive vs. analytical reasoning on order variability and, for one subset
of the games, also measure risk attitudes using the scale proposed by
Blais and Weber (2006). The risk attitude score is then matched with
the order variability, showing no significant correlation, possibly on
account of the small sample. Combining human experiments and agent-
based simulation, Cannella et al. (2019) find that risk aversion increases
average inventory holdings. Finally, though not using the concept of
risk attitude explicitly, Croson et al. (2014) attribute instability of the
supply chain to uncertainty about the decisions of the other echelons of
the chain, which they refer to as “coordination risk”. They prove that
players use an additional “buffer” of stock to protect against co­
ordination risk, a result that matches the finding that more risk averse
individuals hold larger inventory (Cannella et al., 2019).
2.4. Learning in purchasing and supply chains
There has been limited research interest in the role of experience and
learning in purchasing decisions, with the notable exception of the work
by Kaufmann and colleagues. In particular, Kaufmann et al. (2014) find
that experience-based intuition and domain expertise are instrumental to
select suppliers that provide satisfactory cost and quality/delivery/in­
novativeness performance. Experience-based decisions are valuable
especially for managers operating in stable environments, since they
need less to engage in information collection and processing in order to
make effective choices (Kaufmann et al., 2012). Research also suggests
that, even if purchasing experts are trained to carry out risk assessment
and to apply analytical models that support decisions, their expertise
might also lead to over-optimistic feelings of control and therefore to
sub-optimal choices (Kaufmann et al., 2009).
In supply chain research, learning is a recognized resource through
which supply chains gain competitive edge. The literature has stressed
that learning within the supply chain has predominantly an inter-or­
ganizational nature, and it is characterized by a high degree of com­
plexity (Yang et al., 2019). Learning from the experiences of both
successes and failures (Sitkin and Pablo, 1992), supply chains become
able to better anticipate and satisfy customers' needs (Hult et al., 2002).
In summary, research from different disciplines suggests an impact
of risk aversion and of experiential learning on risk taking behaviour.
However, empirical evidence on the relations between these constructs
is still missing in the field of purchasing. The following section develops
testable propositions to explore these relations, by using replenishment
decisions within a supply chain as a case example. Table 1 summarises
the meaning assigned to the concepts under study.
3. Proposition development
3.1. Risk aversion and risk taking in replenishment decisions
The degree of risk aversion is expected to affect risk taking behaviour,
i.e. the more a decision maker dislikes the challenge that risks entails, the
less he is likely to undertake risky actions (Sitkin and Pablo, 1992). The
setting in which the relation between risk aversion and risk taking be­
haviour is analysed is a multi-period, multi-echelon supply chain. The
task of the buyer at each echelon is to order goods from a sole supplier
with the aim to satisfy a variable demand. Similar to other analyses in the
literature, the setting is further characterised by inventory holding costs
and by penalty costs for failing to meet the demand of the downstream
customer (backlog costs). The supply chain is uncoordinated, implying
that no information is exchanged between supply chain echelons, except
orders and goods being shipped (Sterman, 1989).
In this setting, a low risk averse buyer will gamble on the infrequent
occurrence of backlogs and adopt a policy of low orders and inventory
holdings. This policy lowers (known) holding costs but exposes her to the
risk of failing to satisfy the customer if an unexpected variation in demand
occurs. Conversely, a high risk averse buyer will avoid gambling and will
prefer to incur known costs by ordering higher quantities and holding
larger inventory. Based on this line of reasoning, the higher the level of
risk aversion of the decision maker, the higher the average order and
inventory holding. Therefore, we formulate the following proposition:
P1: Buyers with higher risk aversion will order on average higher volumes
from suppliers.
It should be acknowledged that this proposition is true if the
backlog cost is higher than the holding cost. However, though this is not
always the case, it holds true in many instances (Sterman, 1989).
3.2. Experiential learning and risk taking
Through the processing of feedback information, hands-on experi­
ence provides buyers with the opportunity to learn how to approach risk
with the goal to improve performance. The Hot Stove Effect model
suggests that experiential learning leads to reduced voluntary and in­
voluntary risk taking (March, 1996; Denrell and March 2001). Extending
the hot stove argument to a supply chain setting, risky replenishment
decisions are more likely to determine bad outcomes, i.e. backlogs and
disruptions of the supply chain. Since these negative events are generally
costly and likely to be sanctioned by companies, they are cognitively
more salient and will tend to be avoided in future decisions, leading to an
increasing adoption of choices consistent with the avoidance of risk.
Therefore, given P1, the Hot Stove Effect suggests a reduction in both
voluntary and involuntary risk taking through an increase in the average
order, and a reduction in the variability of orders. Consistent with the
above line of reasoning, we formulate the following propositions:
P2a – Experiential learning increases average order quantities for each
echelon.
P2b - Experiential learning reduces the variability of orders for each
echelon.
3.3. Experiential learning, risk aversion and risk taking behaviour
How risk aversion, experience, and actual risk taking behaviour
interact is an open research question. The only contribution we are

Table 1
Definition of concepts investigated in the study.
Concept Definition

Replenishment decision (Sterman, 1989)
Risk aversion attitude (Pratt, 1964)
Risk taking behaviour (Sitkin and Pablo, 1992)
Voluntary risk taking (Denrell and March 2001)
Involuntary risk taking (Denrell and March 2001)
Experiential learning (Sitkin and Pablo, 1992)
Volume of goods ordered from a supplier with the aim to satisfy customer's demand
A buyer's negative attitude towards risk, i.e. the willingness to reduce the cost variance by accepting an increase in the mean cost.
Extent to which a buyer's orders aim at reducing redundant inventory at the risk of detrimental supply chain disruptions.
A lower average order reflects greater voluntary risk taking
A higher standard deviation around the average order reflects greater involuntary risk taking
The process of learning through the experience coming from past orders, past demand received and past inventory levels and stock-
outs.

3
C. Di Mauro, et al.
aware of is the one by Sitkin and Pablo (1992), who develop a con­
ceptual model of the link between risk attitudes and risk taking beha­
viour, which carves a possible role for experience. According to these
authors, the attitude-behaviour relation is moderated by risk percep­
tions, which in turn depend on domain familiarity obtained through
experience. In particular, experience is supposed to stabilize risk per­
ceptions vis à vis the acquisition of new information. To exemplify, in
the context of replenishment decisions, the inexperienced buyer will
tend to have frequent variations of risk perceptions as she obtains new
information, which will tend to blur the relation between her individual
risk attitude and the risk taking content of replenishment decisions.
Conversely, the acquisition of experience, will lead to a stronger asso­
ciation between risk aversion and risk taking behaviour. Therefore, we
propose that:
P3 – The impact of risk aversion on risk taking behaviour will be
strengthened once buyers have gained experiential learning.
Fig. 1 summarises the propositions developed.
4. Study design
In order to test the propositions developed in Section 3, a two-step
procedure involving a questionnaire followed by a business game was
used. Participants in our study were 112 purchasing and supply chain
professionals from several countries, working for the same multi-na­
tional company in the automotive sector. Although the advantage of
using professionals vs. students is debated (Croson and Donohue, 2006;
Machuca and Barajas, 2004; Tokar et al., 2016), it is undeniable that a
professional has a better understanding and greater experience of the
principles of replenishment than a student has (Tokar et al., 2012).
Therefore, she should exhibit less unjustified optimism/pessimism
about risk (Ancarani et al., 2016; Bolton et al., 2012), should be better
able to process information and benefit from learning and instructional
training (Tokar et al., 2012), and embed the professional norms of
supply chain management. This latter aspect should give greater cred­
ibility to the results of human experiments in the eyes of managers and
operations management practitioners.
All participants had at least five years of experience in purchasing,
73 percent were male, 71 percent were under 40 years old, 70 percent
had a bachelor or higher education degree, about 60 percent had a
degree in business disciplines or engineering.
4.1. Measuring risk attitudes
In the first step of the study, participants were required to answer a
short test made up of two correlated questions meant to measure the
individual degree of risk aversion (Barsky et al., 1997) (reported in the
appendix to the main text). The test is grounded in utility theory and is
similar to other hypothetical choice dilemmas that have been used in
order to measure risk propensities/attitudes (MacCrimmon and
Wehrung, 1990).
After considerable piloting, the two questions were framed in terms
of a supplier selection problem, in order to avoid the problem of per­
ceived irrelevancy. Piloting also led the authors to prefer this test over
other well-known measurement tools, such as the lottery test by Holt
Fig. 1. Testable propositions developed.
4
Journal of Purchasing and Supply Management 26 (2020) 100646
and Laury (2002) and the risk taking inventory by Blais and Weber
(2006). The former was discarded because a high rate of inconsistent
responses was observed, while the latter because respondents objected
that the items proposed touched on their private sphere of life and in
several cases refused to provide answers.
The test chosen allowed sorting respondents into four distinct risk
aversion categories (with 1 corresponding to the lowest risk aversion
and 4 to the highest), depending on the answers to the two questions.
Respondents spread fairly equally between lower risk aversion scores (1
and 2 = 49.1%) and higher risk aversion scores (3 and 4 = 50.9%). No
significant correlation was detected between the respondents’ risk
aversion and demographics, such as age, gender and years of work
experience.
4.2. The business game
In the second stage of the study, participants played the Beer Game
(Sterman, 1989), a business game widely adopted to study replenish­
ment decisions in the supply chain. The game was implemented
through an on-line software developed ad hoc using Java. The supply
chain simulated in the study was made up of four echelons: factory,
distributor, wholesaler and retailer, totalling 28 supply chains. Each
echelon was played by a human participant, who was in contact only
with the closest downstream and upstream tiers. An external customer
demand was generated by the software with demand parameters known
to all echelons (normal distribution with mean equal to 100, and
standard deviation equal to 20 units). However, the value of external
demand in each period was observed only by the retailer.
Each echelon's task was to satisfy demand coming from its down­
stream customer, by ordering enough beer from the echelon im­
mediately upstream. Inventory information was not shared across
echelons in order to mimic an uncoordinated supply chain. For the
same reason, communication among players was strictly forbidden
during the game. As each echelon's warehouse had unlimited capacity,
stock-outs could occur either because the echelon in question had or­
dered an insufficient quantity of beer or because the upper echelon (i.e.
the supplier) could not accommodate the order. Unlike the other
echelons, the factory had unlimited access to raw materials. Unit costs
were the standard values used in beer game experiments, namely each
unit placed in inventory had a cost of 0.5 euro per period, whereas
failure to meet demand had a cost of 1 euro per period (backlogs cost)
(Sterman, 1989).
Each order sent upstream had a constant information lag equal to
one period, accounting for supplier's order processing time. In this
study, the supply chain was also characterised by uncertainty in supply
by assuming that transportation time from the supplier to the buyer was
stochastic and uniformly distributed in the interval (1, 2, 3) periods
(Ancarani et al., 2013). Combining demand and supply uncertainty
makes the perception of risk more salient and enhances the potential
effects of risk aversion. At the same time, this volatile environment
created within the beer game presents relevant similarities with the
context of the automotive industry, in terms of demand dynamics and
inability of some suppliers to have reliable delivery times, especially
with oscillating customer demand. Therefore, participants in the busi­
ness game had a perception of relevancy of the simulation environment
created, as was confirmed in personal communication to the authors
after the conclusion of the game.
In each period of the game, each echelon placed an order to the
supplier. The length of the game was randomly determined in order to
avoid end-of-game effects (between 30 and 40 periods). All sessions
used the same realizations of demand and of lead times, in order to
isolate variations due to ordering behaviour from variations due to
different sequences of demand and lead times (Croson and Donohue,
2003). Inventory holdings in the first period of the game were in­
itialized to 300 pieces leaving players to adjust them to the desired
level. Instructions were provided in the form of a power point
C. Di Mauro, et al.
presentation.
In each period t, inventory balance for each player i is such that:
Ii,t = Ii,t-1 + Ri,t - Si,t, where Ii,t is the on-hand quantity (Ii,t > =0), Ri,t
is beer received from the supplier and Si,t is beer shipped to the cus­
tomer. Customer demand is filled automatically and completely if Ii,t-
1 + Ri,t > Di,t, otherwise backlogs occur.
Although the study makes use of human subjects, strictly speaking it
does not qualify as a “human experiment”, because it does not compare
participants’ behaviour across conditions or treatments. Rather, it can
be classified as an observational study (Shadish et al., 2002), in which
behaviour is observed under controlled conditions and the relation of
interest is analysed through statistical methods.
Each participant took part in two repetitions of the game (G1, G2) in
the course of the same day with the aim to study effects of experiential
learning and their interactions with individual risk aversion. The focus
was on learning gained through hands-on experience (Wu and Katok,
2006), rather than on instructional training based on knowledge
transfer (Tokar et al., 2012). In the two repetitions of the game, players
were randomly assigned to chains, while maintaining the same role (i.e.
a retailer in G1 was also a retailer in G2, although he may be assigned to
a different chain) (Wu and Katok, 2006). Role stability across the two
repetitions allowed players to learn about the optimal strategy ac­
cording to one's position within the supply chain, while random as­
signment to chains ensured that at the end of G1 members of a chain
could not coordinate and choose a “strategy” in view of the second
repetition. In order to avoid confounding effects, no debriefing was
provided to players at the end of G1. The incentive system adopted was
based on the total cost generated by a chain (Croson and Donohue,
2003), and rewarded the members of the chain with the lowest total
chain costs. This incentive was clearly communicated to participants
before the start of the game. Costs were calculated over the entire game
horizon and consisted of the sum of inventory costs and backlog costs.
Rewards for each member of the winning chain in each of the games
consisted of a coupon worth 50 euro.
5. Results
5.1. The impact of risk aversion on risk taking behaviour
In order to test the impact of buyers’ individual risk aversion on risk
taking behaviour, we built a multiple regression model in which the
dependent variable was the order placed at time t by buyer i (Oit). The
independent variables were as follows: demand received from the
customer (Demandit), inventory on hand (Inventoryit), unfulfilled de­
mand (Backlogsit), past orders up to four lags (Oi,t-1, Oi,t-2, Oi,t-3, Oi,t-4),
and the individual risk aversion measured on the four-point scale (RA).
Past orders were used as proxy of goods ordered but still in the pipeline
(Sterman, 1989), while backlogs were treated as a separate variable,
rather than as negative inventory, in order to capture any asymmetric
reaction in the positive vs. the negative frame of inventory holding.
Finally, an interaction term between risk aversion and backlogs was
added to check whether reactions to backlogs differed according to the
degree of individual aversion to risk. We expect orders in each period of
the game to be positively related to customer demand and to backlogs,
and to be negatively related to inventory on hand. Lagged orders allow
understanding if players take into account goods in transit when issuing
new orders. If players underestimate the amount in transit in the pi­
peline, we expect these coefficients to be not significantly different from
zero (Sterman, 1989; Croson et al., 2014).
Other model specifications, including an interaction term between
risk aversion and inventory on hand and/or longer lags for customer
demand (Croson et al., 2014), were also estimated. However, these
additional terms were never statistically significant and therefore were
discarded from the analysis. Although the demand distribution of the
final consumer also has an effect on the on-hand inventory levels of
each echelon, this demand was only observable to the Retailer, while its
5
Journal of Purchasing and Supply Management 26 (2020) 100646
theoretical distribution was common knowledge across echelons. For
this reasons, only the demand of the echelon immediately downstream
was added to the equation.
Following previous research, four separate equations for each role
of the chain were estimated (e.g., Ancarani et al., 2013; Narayanan and
Moritz, 2015). Given the presence of both a longitudinal (t) and a cross-
sectional (i) dimension of the data, the model was estimated using the
panel data estimator developed by Arellano and Bond (1991) and
Blundell and Bond (1998), as available in STATA. This model is re­
commended when the panel is dynamic, i.e. the set of independent
variables includes the lagged value of the dependent variable. Two
models were estimated for each role in the chain: Model 1 does not
include a constant term, while Model 2 includes the constant term. In
previous empirical research, the constant term is taken to indicate the
target inventory level (Croson and Donohue, 2006). Because both the
constant term and the risk aversion coefficient are time-invariant,
comparison of Model 1 and Model 2 allows verifying whether the size
and significance of the risk aversion coefficient is partially captured by
the constant term, i.e. whether the desired stock level also depends on
risk aversion. Model 1 and Model 2 were also compared across the two
repetitions of the game, in order to capture any effect of experience.
Table 2 shows that individual risk aversion significantly influences
orders. In G2, high risk aversion players place larger orders for all
echelons in both model specifications (except for the distributor in the
model including a constant term). In G1, risk aversion is significant for
three echelons in the model specification without constant, while it is
significant for retailers and factories when the constant term is in­
troduced. Since the constant term captures the target stock level,
weaker significance of risk aversion when the constant term is added
may signal that risk aversion influences the desired safety stock. Further
comparison with a third model including the constant term but ex­
cluding the risk aversion variable (not reported in the text for space
constraints) shows that the constant is always significant and positive.
These results provide support for P1.
As expected, orders are positively and significantly affected by
customer demand, are always negatively and significantly related to
inventory holdings, and are positively related to backlogs for the three
upper echelons, while the coefficient for backlogs is never statistically
significant for retailers. Based on the value of the coefficients and sta­
tistical significance, we do not find evidence that players react harder to
backlogs than to inventory on hand.
An interesting and novel result is that the interaction term between
risk aversion and backlogs is always statistically significant, except for
the wholesaler in G2 and the factory in G1. Figs. 2 and 3 visually report
the interaction between risk aversion and backlogs in G1-G2 for re­
tailers and distributors respectively. The effect of backlogs on orders is
clearly greater in the case of high risk averse individuals, thus
strengthening the idea that risk aversion has a relevant impact on re­
plenishment decisions.
5.2. The impact of experiential learning on risk taking behaviour
In order to test the impact of experience of the game on replenish­
ment decisions (P2a, P2b), we begin by analysing the behavioural
model underlying order quantity choice in G1 vs. G2. In G2, the coef­
ficient of customer demand decreases with respect to G1. Hence, ex­
periential learning leads to a reduction the so called “demand chasing”
effect (Bostian et al., 2008; D'Urso et al., 2017), which is expected to
translate into lower order variability. To test explicitly whether ex­
perience of the game reduces variability of orders, we compare the
standard deviation of orders between G1 and G2 using a paired t-test.
Each period in G1 is matched with the corresponding period of the
game in G2, in order to keep into account that behaviour can change
during each game. Table 3 provides evidence that except for the Re­
tailer, the standard deviation is statistically lower in G2, therefore
confirming P2b.
 C. Di Mauro, et al.

Table 2
Panel model regression.
Retailer Retailer Wholesaler Model 1 Wholesaler Distributor Model 1 Distributor Factory Factory
Model 1 Model 2 Model 2 Model 2 Model 1 Model 2

G1 G2 G1 G2 G1 G2 G1 G2 G1 G2 G1 G2 G1 G2 G1 G2

Demand 0.60 0.10 0.60 0.12 0.77 0.48 0.80 0.49 0.78 0.03 0.79 0.03 0.71 0.37 0.72 0.38
(0.07) (0.08) (0.07) (0.09) 0.08 (0.1) (0.08) (0.1) (0.03) (0.02) (0.03) (0.02) (0.03) (0.03) (0.03) (0.04)
*** *** *** *** *** *** *** *** *** *** *** *** ***

Inventor −0.07 −0.17 −0.07 −0.17 −0.01 −0.27 −0.01 −0.27 −0.09 −0.09 −0.09 −0.09 −0.03 −0.07 −0.03 −0.07
(0.01) (0.01) (0.01) (0.02) (0.00) (0.04) (0.00) (0.04) (0.02) (0.01) (0.02) (0.01) (0.01) (0.01) (0.01) (0.01)
*** *** *** *** *** *** *** *** *** *** *** *** *** *** *** ***

Backlogs −0.05 −0.05 −0.05 −0.05 0.66 0.13 0.69 0.12 0.18 0.2 0.19 0.18 0.07 0.23 0.11 0.23
(0.10) (0.03) (0.11) (0.03) (0.07) (0.07) (0.07) (0.07) (0.03) (0.02) (0.04) (0.02) (0.05) (0.04) (0.05) (0.04)
*** *** *** *** *** *** *** ** ***

Order(t-1) 0.18 0.17 0.19 0.17 0.5 −0.02 0.51 −0.01 −0.22 0.24 −0.22 0.24 0.11 0.27 0.11 0.28
(0.03) (0.03) (0.03) 0.03 0.02 0.02 0.02 0.02 0.03 0.03 0.03 0.03 0.02 0.02 0.02 0.02
*** *** *** *** *** *** *** *** *** *** *** *** *** ***

Order(t-2) 0.05 0.13 0.06 0.13 0.47 0.01 0.47 0.02 −0.01 0.21 −0.01 0.21 −0.07 −0.06 −0.08 −0.06

6
0.03 0.03 0.03 0.03 0.03 0.02 0.03 0.02 0.02 0.03 0.02 0.03 0.02 0.02 0.02 0.02
** *** ** *** *** *** *** *** *** *** *** **

Order(t-3) −0.12 0.01 −0.13 0.01 −0.22 0.01 −0.22 0.01 −0.15 −0.02 −0.15 −0.03 0.23 0.09 0.24 0.09
0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.02 0.03 0.02 0.03
*** *** *** *** *** *** *** *** *** ***

Order(t-4) 0.10 0.06 0.11 0.06 −0.11 −0.04 −0.11 −0.04 0.05 −0.07 0.05 −0.08 0.09 −0.02 0.09 −0.03
0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.02 0.03 0.02 0.03
*** ** *** ** *** *** *** *** *** ***

Risk Aversion 20.22 24.30 45.81 33.51 16.03 54.8 52.19 49.24 44.28 31.43 65.95 −12.09 63.21 40.47 158.95 50.82
5.05 4.72 21.51 11.08 19.1 12.3 45.29 26.22 16.04 4.94 45.53 12.75 26.52 5.95 106.38 13.51
*** *** ** *** *** ** *** *** *** *** ***

Risk Aversion* 0.09 0.04 0.09 0.04 −0.29 −0.02 −0.30 −0.02 −0.03 −0.05 −0.03 −0.04 0.04 −0.03 0.02 −0.03

Backlog 0.04 0.01 0.04 0.01 0.03 0.03 0.03 0.03 0.007 0.007 0.008 0.007 0.02 0.01 0.02 0.01
** *** ** *** *** *** *** *** *** *** *** ***

Constant −99.38 −24.40 −138.81 −19.60 −92.15 105.54 −416.47 −77.68

59.88 30.76 108.45 63.36 114.13 31.77 265.37 30.23
*** ***

**p < 0.05, ***p < 0.01, standard errors in parenthesis.

Journal of Purchasing and Supply Management 26 (2020) 100646
C. Di Mauro, et al.
Fig. 2. Interaction effects between backlogs and risk aversion – Retailer.
On the other hand, we do not find evidence supporting P2a and the
“Hot stove effect” prediction that experience decreases voluntary risk
taking behaviour by increasing orders. In fact, Table 3 shows that mean
orders in G2 decrease with respect to G1, except for the Retailer. The
same reduction is observed for the average inventory in three of the
echelons. This result also aligns with the finding that players become
more reactive to increases in inventory holdings in G2 with respect to
G1, as shown by the inventory coefficients in the regression model in
Table 2. In spite of lower orders and inventory, G2 is also characterised
by statistically lower backlogs, a result that can be attributed to the
lower variability of orders.
5.3. The impact of experiential learning on the relation between risk
aversion and risk taking behaviour
With the aim to verify whether the relation between individual risk
aversion and orders is fostered by experience (P3), we first compare the
statistical significance of the risk aversion coefficient in the two equa­
tions corresponding to G1 and G2. The comparison shows that risk
aversion is more often statistically significant in G2 than in G1. This
finding is consistent with the fact that in G1, inexperience of the game
leads to continuous adjustments in risk perception (an unobserved
variable in our model) that end up modifying the relation between risk
aversion and orders. In the second repetition of the game, players have
gained domain experience through hands-on learning. This experience
stabilizes risk perception along the game and allows the relation be­
tween risk aversion and orders to emerge in a clearer fashion. As a
result, the relation is statistically significant in a higher number of in­
stances in G2 than in G1. This suggests an enhanced effect of risk
Fig. 3. Interaction effects between backlogs and risk aversion – Distributor.
7
Journal of Purchasing and Supply Management 26 (2020) 100646
aversion following experiential learning, consistent with P3.
Table 4 further shows a paired comparison of mean and standard
deviation of orders between G1 and G2, separating players by degree of
risk aversion (high and low). Players’ mean orders appear to react to
experience in the same fashion, regardless of risk aversion level.
However, the t-test highlights that high risk averse players do not al­
ways significantly modify the standard deviation of orders after gaining
experience of the game, whereas the adjustment of low risk averse
players is always statistically significant. Overall, these results suggest
that experiential learning affects risk taking in different fashions ac­
cording to the risk aversion of the buyer.
In order to supplement the analysis of the interactions between risk
aversion, learning, and risk taking, useful insights can be obtained by
exploring supply chain operational performance and service level in the
different configurations. Because different chains exhibited different
combinations of high/low risk averse players, we calculated the
average risk aversion of the chain as the average score of the players in
the same chain. A high risk aversion chain was defined as having an
average risk aversion score equal or greater than 2.5. A matched t-pair
comparison of the distribution of period costs between G1 and G2
shows that low risk averse chains reduce their costs in G2 with respect
to G1 (p < 0.0022), while the costs of high risk averse chains increase
in G2 (p < 0.0003) with respect to G1. The service level was measured
through the fill rate, i.e. the ratio of goods shipped by the retailer to
external customer demand received (Chen et al., 2000). In G2, the
median fill rate was exactly the same for high and low risk aversion
chains (0.97). Overall, these results suggest that learning improves
operational performance for low risk averse chains but not for high risk
averse ones.
C. Di Mauro, et al. Journal of Purchasing and Supply Management 26 (2020) 100646

Table 3 risks) with different risk aversion levels of the players.

Paired comparison G1 vs G2 (average orders, st.dev. orders, inventory and For the practice of purchasing, the relevant issue is that the high risk
backlogs). averse buyer may build up excessive inventory, thus increasing working
Order St.dev. Order Inventory Backlog capital. Results of this study suggest that high risk averse buyers may be
unsuited to handle situations in which the organization operates in
RETAILER sectors where the improvement of working capital management and the
G1 114.8280 106.2054 147.2632 76.9259
reduction of days on hand for purchased items are crucial. Therefore,
G2 189.8263 184.9875 101.3003 81.9444
t-test −5.348 −4.062 4.240 −0.410 the use of risk aversion measures when hiring new buyers and in­
p-value 0.000 0.000 0.000 .685 ventory managers is recommended.
WHOLESALER A second contribution of the study is the analysis of the linkages
G1 163.7831 336.0469 590.3294 189.3399
between risk aversion and experiential learning in replenishment de­
G2 95.2593 106.2475 233.6257 78.1574
t-test 6.026 4.917 3.408 7.496
cisions. By comparing risk taking in two repetitions of the game, we
p-value 0.000 0.000 0.002 0.000 have found partial support for the “Hot Stove Effect”. In fact, hands-on
DISTRIBUTOR learning was an effective tool to reduce oscillations of orders within the
G1 168.2328 366.9351 224.3770 471.4378 supply chain, whereas the hypothesis that orders increase with ex­
G2 87.2328 91.3487 310.2434 148.9444
perience must be rejected. The higher variability of orders in G1 can be
t-test 4.979 4.550 −8.282 6.729
p-value 0.000 0.000 0.000 0.000 linked to the “demand chasing bias”, whereby ordered quantities clo­
FACTORY sely adjust towards the most recently-observed demand quantity, and
G1 188.183 521.929 449.425 265.367 demand forecasting ignores past information on the order history from
G2 78.405 100.333 403.600 65.127
the immediate customers. Since this bias is generally associated with
t-test 5.036 4.544 0.928 5.932
p-value 0.000 0.000 0.362 0.000
suboptimal performance (Wu and Chen, 2014), benefits could accrue
from providing buyers with opportunities for learning. In particular,
recent research on “simulated experience” (Hogarth and Soyer, 2015)
6. Discussion has highlighted the benefits of allowing managers to gain experiential
evidence about the relation between different actions and their poten­
This study has observed individual replenishment decisions in a tial outcomes through simulation platforms. These benefits are further
supply chain and has related them to individual risk aversion and ex­ amplified the higher the degree of uncertainty, therefore making it a
periential learning, under the assumption of a causal relation. A number useful tool to teach how to take decisions within supply chains char­
of results that bear relevance for the theory and practice of purchasing acterised by either highly turbulent demand conditions or supply risks
and the functioning of supply chains emerge. or by high coordination risks because of the complexity of their struc­
First, results show that the risk aversion of the buyer matters for ture.
purchasing decisions. The result that higher individual risk aversion Results also imply that the impact of risk aversion is robust to ex­
leads to larger orders at each specific echelon is corroborated by mul­ periential learning. In fact, the positive relation between the individual
tivariate analysis controlling for the effects of other explanatory vari­ risk aversion score and order quantities persists also in the second re­
ables such as customer demand, inventory and goods in transit. From a petition. In addition, low risk-averse buyers respond to learning dif­
theory standpoint, this finding substantiates the importance of in­ ferently with respect to high risk averse ones. It is of interest that, after
corporating risk attitudes and behavioural components in model as­ being exposed to experiential learning, supply chains characterised by
sumptions of purchasing decisions. lower risk aversion exhibit lower costs. These results align with con­
From a supply chain perspective, the research builds on experi­ ventional wisdom and past findings, according to which “success” re­
mental supply chain dynamics studies (Sterman, 1989; Croson and quires some degree of risk taking and some propensity to take risks
Donohue, 2006; Wu and Katok, 2006; Tokar et al., 2012; Croson et al., (MacCrimmon and Wehrung, 1990).
2014; and Moritz and Narayanan, 2015), and extends them by sug­ Given that hands-on learning was found to be less impactful for high
gesting that some results previously observed can be explained by risk risk averse players, identifying de-biasing strategies (Kaufmann et al.,
aversion. Specifically, Croson et al. (2014) argue that uncertainty 2009) to curb excessive risk aversion may result in improved perfor­
concerning the behaviour of supply chain partners engenders the per­ mance. For instance, the negative effects of risk aversion may be
ception of a high “coordination risk”, to which organizations respond dampened by avoiding the use of demand forecasting rules that give
with higher inventory. The results of this study support the conjecture more weight to recent demand information, and therefore encourage
that the higher orders of high risk averse players occur because risk demand chasing. In the same vein, the availability of Point of Sale data
aversion amplifies the perception of coordination risk. This hypothesis may reduce continuous forecasting updates, especially for upper layers
could be tested in future studies by comparing experimentally short and of the chain.
long supply chains (accounting for different degrees of coordination

Table 4
Paired comparison of risk taking in G1 vs. G2 (by period).
Standard Deviation of orders Orders

Mean difference G1-G2 t Sig. (2-tail) Mean difference G1-G2 t Sig. (2-tail)

Retailer Low Risk Averse −148.44 −6.62 0.00 −77.07 −6.60 0.00
Wholesaler Low Risk Averse 281.78 4.60 0.00 92.30 4.79 0.00
Distributor Low Risk Averse 115.41 4.00 0.00 51.93 3.90 0.00
Factory Low Risk Averse 466.78 4.15 0.00 136.56 4.78 0.00
Retailer High Risk Averse −31.93 −1.59 0.13 −76.59 −4.00 0.00
Wholesaler High Risk Averse 23.63 2.03 0.05 22.78 3.04 0.01
Distributor High Risk Averse 323.96 3.48 0.00 109.26 3.53 0.00
Factory High Risk Averse 152.67 1.83 0.08 60.78 1.99 0.06

8
C. Di Mauro, et al.
7. Limitations and research agenda
Future research is called to deepen the understanding of the links
between risk attitudes measured ex ante and risk taking in purchasing
decisions. One potential research avenue should address the relation
between purchasing decisions and alternative measures of risk attitude
with respect to the one adopted in this study. In addition, measures of
perceived risk could be introduced to moderate the relation between
risk attitude and risk taking behaviour.
A second research direction could focus on the composition of
supply chains by risk attitudes. Supply chain performance could be
better understood by designing experiments that sort players to supply
chains according to individual risk attitude. In particular, it would be of
interest to manipulate the composition of the supply chain either by
grouping supply chain members exhibiting homogenous risk aversion
or by positioning high risk averse individuals in different roles of the
chain.
The dependence of risk taking behaviour on experience also calls for
models of supply and inventory management explicitly incorporating
learning, subject to different hypotheses about cognition. These models
could illuminate on the potential behavioural patterns and performance
outcomes in context characterised by high levels of uncertainty.
Additionally, future research should explore how the impact of risk
aversion is moderated by contextual factors such as the degree of
exogenous uncertainty. This could be achieved by contrasting risk
taking in turbulent and stable environments.
Finally, since our results may depend on the assumption that
backlog costs are higher than inventory holding costs, variations of
these parameters would allow testing the robustness of findings. In
turn, this would permit a more precise characterization of the suit­
ability of assigning decision makers with different degrees of risk
aversion to different decision-making contexts, with direct implications
for personnel selection and task matching in supply management.
Author statement
The authors declare that they have equally contributed to the paper.
Declaration of competing interest
The Authors declare they do not have any conflict of interest.
Acknowledgments
Carmela Di Mauro and Alessandro Ancarani acknowledge partial
financial support by the University of Catania within the project “Piano
della Ricerca Dipartimentale 2016–2018” of the Department of Civil
Engineering and Architecture.
Appendix A. Supplementary data
Supplementary data to this article can be found online at https://
doi.org/10.1016/j.pursup.2020.100646.
References
Agrawal, V., Seshadri, S., 2000. Impact of uncertainty and risk aversion on price and
order quantity in the newsvendor problem. Manuf. Serv. Oper. Manag. 2 (4),
410–423.
Ancarani, A., Di Mauro, C., D'Urso, D., 2013. A human experiment on inventory decisions
under supply uncertainty. Int. J. Prod. Econ. 142 (1), 61–73.
Ancarani, A., Di Mauro, C., D'Urso, D., 2016. Measuring overconfidence in inventory
management decisions. J. Purch. Supply Manag. 22 (3), 171–180.
Arellano, M., Bond, S., 1991. Some tests of specification for panel data: Monte Carlo
evidence and an application to employment equations. Rev. Econ. Stud. 58 (2),
277–297.
Barsky, R.B., Juster, F.T., Kimball, M.S., Shapiro, M.D., 1997. Preference parameters and
behavioral heterogeneity: an experimental approach in the health and retirement
9
Journal of Purchasing and Supply Management 26 (2020) 100646
study. Q. J. Econ. 112 (2), 537–579.
Bendoly, E., Donohue, K., Schultz, K.L., 2006. Behavior in operations management: as­
sessing recent findings and revisiting old assumptions. J. Oper. Manag. 24 (6),
737–752.
Blais, A.R., Weber, E.U., 2006. A domain-specific risk-taking (DOSPERT) scale for adult
populations. Judgment Decis. Making 1 (1), 33–47.
Biele, G., Erev, I., Ert, E., 2009. Learning, risk attitude and hot stoves in restless bandit
problems. J. Math. Psychol. 53 (3), 155–167.
Blundell, R., Bond, S., 1998. Initial conditions and moment restrictions in dynamic panel
data models. J. Econom. 87 (1), 115–143.
Bolton, G.E., Ockenfels, A., Thonemann, U.W., 2012. Managers and students as news­
vendors. Manag. Sci. 58 (12), 2225–2233.
Bostian, A.A., Holt, C.A., Smith, A.M., 2008. Newsvendor “pull-to-center” effect: adaptive
learning in a laboratory experiment. Manuf. Serv. Oper. Manag. 10 (4), 590–608.
Bradbury, M.A., Hens, T., Zeisberger, S., 2014. Improving investment decisions with si­
mulated experience. Rev. Finance 19 (3), 1019–1052.
Busemeyer, J.R., 1985. Decision making under uncertainty: a comparison of simple
scalability, fixed sample, and sequential sampling models. J. Exp. Psychol. 11,
538–564.
Cannella, S., Di Mauro, C., Dominguez, R., Ancarani, A., Schupp, F., 2019. An exploratory
study of risk aversion in supply chain dynamics via human experiment and agent-
based simulation. Int. J. Prod. Res. 57 (4), 985–999.
Chen, F., Drezner, Z., Ryan, J.K., Simchi-Levi, D., 2000. Quantifying the bullwhip effect in
a simple supply chain: the impact of forecasting, lead times, and information. Manag.
Sci. 46 (3), 436–443.
Chen, Y.J., Seshadri, S., 2006. Supply chain structure and demand risk. Automatica 42
(8), 1291–1299.
Chen, X., Sim, M., Simchi-Levi, D., Sun, P., 2007. Risk aversion in inventory management.
Oper. Res. 55 (5), 828–842.
Croson, R., Donohue, K., 2003. Impact of POS data sharing on supply chain management:
an experimental study. Prod. Oper. Manag. 12 (1), 1–11.
Croson, R., Donohue, K., 2006. Behavioral causes of the bullwhip effect and the observed
value of inventory information. Manag. Sci. 52 (3), 323–336.
Croson, R., Donohue, K., Katok, E., Sterman, J., 2014. Order stability in supply chains:
coordination risk and the role of coordination stock. Prod. Oper. Manag. 23 (2),
176–196.
Denrell, J., 2007. Adaptive learning and risk taking. Psychol. Rev. 114 (1), 177–187.
Denrell, J., March, J.G., 2001. Adaptation as information restriction: the hot stove effect.
Organ. Sci. 12 (5), 523–538.
D'Urso, D., Di Mauro, C., Chiacchio, F., Compagno, L., 2017. A behavioural analysis of the
newsvendor game: anchoring and adjustment with and without demand information.
Comput. Ind. Eng. 111, 552–562.
Eckel, C.C., Grossman, P.J., 2008. Men, women and risk aversion: experimental evidence.
Handb. Exp. Econ. Results 1, 1061–1073.
Eckel, C., Johnson, C., Montmarquette, C., 2013. Human capital investment by the poor:
informing policy with laboratory experiments. J. Econ. Behav. Organ. 95, 224–239.
Erev, I., Barron, G., 2005. On adaptation, maximization, and reinforcement learning
among cognitive strategies. Psychol. Rev. 112 (4), 912–931.
Fahimnia, B., Pournader, M., Siemsen, E., Bendoly, E., Wang, C., 2019. Behavioral op­
erations and supply chain management–A review and literature mapping. Decis. Sci.
J. 50 (6), 1127–1183.
Foerstl, K., Schleper, M.C., Henke, M., 2017. Purchasing and supply management: from
efficiency to effectiveness in an integrated supply chain. J. Purch. Supply Manag. 23
(4), 223–228.
Ghosh, D., Ray, M.R., 1997. Risk, ambiguity, and decision choice: some additional evi­
dence. Decis. Sci. J. 28 (1), 81–104.
Gigerenzer, G., 2002. Reckoning with Risk: Learning to Live with Uncertainty. Allen Lane.
The Penguin Press, New York.
Giri, B.C., 2011. Managing inventory with two suppliers under yield uncertainty and risk
aversion. Int. J. Prod. Econ. 133 (1), 80–85.
Guiso, L., Paiella, M., 2008. Risk aversion, wealth, and background risk. J. Eur. Econ.
Assoc. 6 (6), 1109–1150.
Haruvy, E., Erev, I., Sonsino, D., 2001. The medium prizes paradox: evidence from a
simulated casino. J. Risk Uncertain. 22 (3), 251–261.
Hogarth, R.M., Soyer, E., 2015. Using simulated experience to make sense of big data.
MIT Sloan Manag. Rev. 56 (2), 49.
Holt, C.A., Laury, S.K., 2002. Risk aversion and incentive effects. Am. Econ. Rev. 92 (5),
1644–1655.
Hult, G.T.M., Ketchen, D.J., Slater, S.F., 2002. A longitudinal study of the learning climate
and cycle time in supply chains. J. Bus. Ind. Market. 17 (4), 302–323.
Jonsson, P., Mattsson, S.A., 2006. A longitudinal study of material planning applications
in manufacturing companie. Int. J. Oper. Prod. Manag. 26 (9), 971–995.
Kahneman, D., Tversky, A., 1979. Prospect theory: an analysis of decision under risk.
Econometrica: J. Econ. Soc. 47 (2), 263–291.
Kaufmann, L., Kreft, S., Ehrgott, M., Reimann, F., 2012. Rationality in supplier selection
decisions: the effect of the buyer's national task environment. J. Purch. Supply
Manag. 18 (2), 76–91.
Kaufmann, L., Meschnig, G., Reimann, F., 2014. Rational and intuitive decision-making in
sourcing teams: effects on decision outcomes. J. Purch. Supply Manag. 20 (2),
104–112.
Kaufmann, L., Michel, A., Carter, C.R., 2009. Debiasing strategies in supply management
decision‐making. J. Bus. Logist. 30 (1), 85–106.
Kolb, D.A., Boyatzis, R.E., Mainemelis, C., 2001. Experiential learning theory: previous
research and new directions. Perspect. Think. Learn. Cognit. Styles 1 (8), 227–247.
Koudstaal, M., Sloof, R., Van Praag, M., 2015. Risk, uncertainty, and entrepreneurship:
evidence from a lab-in-the-field experiment. Manag. Sci. 62 (10), 2897–2915.
C. Di Mauro, et al.
Lee, H.L., Padmanabhan, V., Whang, S., 1997. Information distortion in a supply chain:
the bullwhip effect. Manag. Sci. 43 (4), 546–558.
Li, H., Mai, L., Zhang, W., Tian, X., 2019. Optimizing the credit term decisions in supply
chain finance. J. Purch. Supply Manag. 25 (2), 146–156.
Lind, L., Pirttilä, M., Viskari, S., Schupp, F., Kärri, T., 2012. Working capital management
in the automotive industry: financial value chain analysis. J. Purch. Supply Manag.
18 (2), 92–100.
Lopes, L.L., 1987. Between hope and fear: the psychology of risk. Adv. Exp. Soc. Psychol.
20, 255–295.
MacCrimmon, K.R., Wehrung, D.A., 1990. Characteristics of risk taking executives.
Manag. Sci. 36 (4), 422–435.
Machuca, J.A., Barajas, R.P., 2004. The impact of electronic data interchange on reducing
bullwhip effect and supply chain inventory costs. Transport. Res. E Logist. Transport.
Rev. 40 (3), 209–228.
March, J.G., 1996. Learning to be risk averse. Psychol. Rev. 103 (2), 309–319.
March, J.G., Shapira, Z., 1992. Variable risk preferences and the focus of attention.
Psychol. Rev. 99 (1), 172.
Narayanan, A., Moritz, B.B., 2015. Decision making and cognition in multi‐echelon
supply chains: an experimental study. Prod. Oper. Manag. 24 (8), 1216–1234.
Pratt, J.W., 1964. Risk aversion in the small and in the large. Econometrica: J. Econ. Soc.
32 (1–2), 122–136.
Rabin, M., Thaler, R.H., 2001. Anomalies: risk aversion. J. Econ. Perspect. 15 (1),
219–232.
10
Journal of Purchasing and Supply Management 26 (2020) 100646
Shadish, W.R., Cook, T.D., Campbell, D.T., 2002. Experimental and Quasi-Experimental
Designs for Generalized Causal Inference. Wadsworth Cengage learning.
Simon, H.A., 1972. Theories of bounded rationality. Decis. Organ. 1 (1), 161–176.
Sitkin, S.B., Pablo, A.L., 1992. Reconceptualizing the determinants of risk behavior. Acad.
Manag. Rev. 17 (1), 9–38.
Staw, B.M., Ross, J., 1987. Behavior in escalation situations: antecedents, prototypes, and
solutions. Res. Organ. Behav. 9, 39–78.
Sterman, J.D., 1989. Modeling managerial behavior: misperceptions of feedback in a
dynamic decision making experiment. Manag. Sci. 35 (3), 321–339.
Thaler, R.H., 1999. Mental accounting matters. J. Behav. Decis. Making 12 (3), 183–206.
Tomlin, B., 2006. On the value of mitigation and contingency strategies for managing
supply chain disruption risks. Manag. Sci. 52 (5), 639–657.
Tokar, T., Aloysius, J.A., Waller, M.A., 2012. Supply chain inventory replenishment: the
debiasing effect of declarative knowledge. Decis. Sci. J. 43 (3), 525–546.
Tokar, T., Aloysius, J., Waller, M., Hawkins, D.L., 2016. Exploring framing effects in in­
ventory control decisions: violations of procedure invariance. Prod. Oper. Manag. 25,
306–329.
Wu, D.Y., Chen, K.Y., 2014. Supply chain contract design: impact of bounded rationality
and individual heterogeneity. Prod. Oper. Manag. 23 (2), 253–268.
Wu, D.Y., Katok, E., 2006. Learning, communication, and the bullwhip effect. J. Oper.
Manag. 24 (6), 839–850.
Yang, Y., Jia, F., Xu, Z., 2019. Towards an integrated conceptual model of supply chain
learning: an extended resource-based view. Supply Chain Manag. 24 (2), 189–214.