Can Providing Algorithmic Performance Information Facilitate Humans’ Inventory Ordering Behaviors?

Over recent years, companies have been increasingly adopting algorithmic decision systems (ADS) to replace humans. In this paper, we focus on how ADS facilitates human managers’ decision making rather than replacing it. Our pilot field experiment shows that ADS generally improves the performance of inventory ordering decisions. To understand how to use ADS to further improve human managers’ inventory ordering behaviors, we conduct a main field experiment in which we provide ADS performance information to human managers. Our results suggest that providing ADS performance information can increase managers’ trust in and usage time of ADS, and can, consequently, improve their inventory ordering decisions. Interestingly, providing negative ADS performance information is more effective than providing positive ADS information. Furthermore, we explore the heterogeneous effect across different products and find that disclosing ADS performance information is more helpful for human managers overseeing products with lower sales and higher uncertainty, thus solving the pain points where human managers need algorithmic recommendations the most. These results demonstrate the importance of algorithm transparency in the human adoption of ADS and sheds light on the managerial implications of using ADS within corporations