Professor Shen Houcai, Nanjing University

19-10-2006

11:00 a.m. to 12:00 p.m.

Faculty of Engineering, Seminar Room E1-06-06, NUS

Based on ``prospect theory`` developed by Kahneman and Tuversky, this paper studies the decision behavior of the engineer-to-order manufacturer who makes the component procurement under uncertain environment both in demand and in supply price. Through this model, we discuss some key issues such as, what is the effect of the manufacturer`s loss aversion on the optimal initial order quantity, how the demand uncertainty and the emergent supply price affect the decision behavior of the loss-averse manufacturer, etc. We find that the purchasing behavior for the loss-averse manufacturer is different from the risk-neutral one or the risk-averse one: the loss-averse manufacturer may order more quantity in advance when demand becomes more uncertain, when initial procurement price goes higher, and when the component becomes less valuable, etc.

Houcai SHEN received his B.S. in Mathematics from Nanjng University in 1986, M.S. and Ph. D. in Automatic Control Theory and Application from Southeast University, Nanjing, China in 1989 and 1995. Currently, he is a Professor in the Department of Management Science and Engineering, Nanjing University. His main research interests include Supply Chain Management, Decision Analysis, and Stochastic Models, etc. He got several grants from the National Natural Science Foudation of China (NSFC), and attended and give talks in several international conferences held by INFORMS, IEEE, etc.