Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305866 
Year of Publication: 
2022
Citation: 
[Journal:] Global Business & Finance Review (GBFR) [ISSN:] 2384-1648 [Volume:] 27 [Issue:] 5 [Year:] 2022 [Pages:] 55-64
Publisher: 
People & Global Business Association (P&GBA), Seoul
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.
Subjects: 
Ambiguity
safety stock
stochastic lead time
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

Files in This Item:
File
Size
544.98 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.