In:
GLOBAL BUSINESS FINANCE REVIEW, People and Global Business Association, Vol. 27, No. 5 ( 2022-10-31), p. 55-64
Abstract:
Purpose: The purpose of this study is to investigate how ambiguity faced by the risk-neutral manager affects the firm’s optimal level of safety stock. Design/methodology/approach: This study adopts the traditional model of Arrow et al. (1951) and employ a manager who has multiple prior beliefs about the probability distribution of the lead time. Findings: This study finds that facing lead time ambiguity, the manager becomes more conservative when choosing the optimal stock level to hold and the amount of safety stock. Research limitations/implications: The future research would consider a risk-averse manager who could be compensated or punished as a result of stock management. Then the future research would examine the interactive effects of the manager’s risk aversion and lead time ambiguity on the optimal safety stock level. Originality/value: This would be the first study that investigates the effects of ambiguity on the level of safety stock.
Type of Medium:
Online Resource
ISSN:
1088-6931
,
2384-1648
Uniform Title:
Safety Stock Optimization under Lead Time Ambiguity
DOI:
10.17549/gbfr.2022.27.5.
DOI:
10.17549/gbfr.2022.27.5.55
Language:
Unknown
Publisher:
People and Global Business Association
Publication Date:
2022
detail.hit.zdb_id:
2839730-7
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