Inventory management with mental accounting

We frame a retailer's decision problem under the mental accounting behavior model by assuming that decision maker confronts uncertain supply and demand at the beginning of a selling season. With numerical study, we show that under the mental accounting behavior model, the retailer might order less than the profit-maximized retailer, the higher the loss-averse degree of leftover account, the lower the optimal order quantity. Moreover, we analyze the effect of other parameters on the retailer's optimal decision.