Upgrade auctions in build-to-order manufacturing with loss-averse customers
Manufacturers always benefit from upgrading orders of low-valuation customers. Strategic behavior of high-valuation customers can impair the results. A gain-loss utility model explains different behavior of the two customer groups. Contribution margin can be improved while planning reliability is maintained. Highest improvement when loss aversion exceeds a critical value.
upgrades auctions revenue management behavioral operations management make-to-order