A Prospect Theory-based order model under stochastic demand

It's based on the prospect theory to study the order problem under stochastic demand. Firstly, we review the traditional order model and disadvantages of the expected utility theory, and then briefly introduce the prospect theory. Secondly, followed by the framework of prospect theory, the paper analysis the order's value function perception, subjective probability density and weight function, and then based on prospect theory establish a order model which is a new and useful theoretical tool for the research of the order problem in the supply chain management; Finally, we have analysed the new model by taking a calculation case.