Consider Two Inventory Problems with Identical Demand, Holding Cost, and Setup

question 212

Essay

Consider two inventory problems with identical demand, holding cost, and setup cost. In one, goods arrive instantly, but in the other goods arrive at a measurable rate. Which of these problems will have the larger optimal order quantity? Why?

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Definitions:

Availability Heuristic

A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision.

Representativeness Heuristic

The representativeness heuristic is a cognitive bias where people judge the probability of an event or the likelihood of an object belonging to a category by how much it resembles a typical case.

Heuristics

Cognitive shortcuts or rules of thumb that simplify decision making, often used unconsciously.

Effortful Thinking

The cognitive processing that requires a deliberate, conscious effort to solve complex problems or to gain new insights.