Behavioral and Experimental Methods in Operations Management (IE 640)

2021 Spring
Faculty of Engineering and Natural Sciences
Industrial Engineering(IE)
Murat Kaya,
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Doctoral, Master
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This course aims to introduce the use of behavioral and experimental methods that have been increasingly popular in the field of operations management. In particular we use a supply chain scenario to study how human beings make individual and strategic decisions in the face of uncertainty and risk. First, we use the standard newsvendor problem to discuss decisions involving only a single individual. This problem is concerned with the order quantity decision of a retailer that faces probabilistic demand. Then, we consider a simple manufacturer-retailer supply chain where the retailer faces the newsvendor problem, and her problem parameters are determined by the contract that the manufacturer offers. This scenario allows us to study what happens to decisions when two individuals interact strategically with each other . Course discussion is based on results from decision-making experiments with human subjects. In addition to published research papers, we also use data from experiments conducted at Sabanci University.


1. Use the newsvendor model to investigate stochastic inventory problems. 2. Discuss the heuristics and biases observed in human newsvendor experiments. 3. Explain the concept of supply chain coordination and describe the mechanics of fundamental supply chain contracts. 4. Describe the factors that affect strategic long-run interactions between human decision makers. 5. Conduct hypothesis testing and build regression models on experiment data.


  Percentage (%)
Midterm 40
Exam 12
Assignment 10
Participation 13
Individual Project 25