Effects of self-esteem on supply chain decisions

Official URL: http://risc01.sabanciuniv.edu/record=b2315125_ (Table of contents)

We study the effects of self-esteem on supply chain decisions and profits. To this end, the data obtained in computerized decision-making experiments in which human subjects participated as manufacturers (who offer a contract) and retailers (who either reject the contract, or accept and set the order quantity from the manufacturer) that engage in a long run relationship is used. Rosenberg scale survey data is used to categorize the manufacturers and retailers into high and low self-esteem classes. We find low selfesteem manufacturers to offer more attractive contracts to retailers, obtain lower profits themselves and cause higher supply chain total profit. Contrary to our expectations, we find high self-esteem retailers to end up accepting less favorable contracts compared to low self-esteem retailers, though the difference is not statistically significant. We explain this phenomena with the overordering tendency of the high self-esteem retailers: They overorder more frequently, and make larger overorders. We observe manufacturers to increase the attractiveness of their contract offer in the next period following a rejection. Finally, we develop a regression model to explain retailer order quantity decisions based on the retailer self-esteem score, lost demand in the previous period, number of contract rejections in the relationship, and the optimal order quantity. Our results indicate the importance of self-esteem as a significant factor in supply chain decisions and firms’ profit performance.