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Decision-making and the newsvendor problem: an experimental study

Author

Listed:
  • U Benzion

    (Ben-Gurion University of the Negev
    The Max Stern Academic College of Emek Yezreel)

  • Y Cohen

    (The Open University of Israel)

  • R Peled

    (Ben-Gurion University of the Negev)

  • T Shavit

    (The Open University of Israel)

Abstract

This paper investigates repetitive purchase decisions of perishable items in the face of uncertain demand (the newsvendor problem). The experimental design includes: high, or low profit levels; and uniform, or normal demand distributions. The results show that in all cases both learning and convergence occur and are effected by: (1) the mean demand; (2) the order-size of the maximal expected profit; and (3) the demand level of the immediately preceding round. In all cases of the experimental design, the purchase order converges to a value between the mean demand and the quantity for maximizing the expected profit.

Suggested Citation

  • U Benzion & Y Cohen & R Peled & T Shavit, 2008. "Decision-making and the newsvendor problem: an experimental study," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(9), pages 1281-1287, September.
    • Handle: RePEc:pal:jorsoc:v:59:y:2008:i:9:d:10.1057_palgrave.jors.2602470
    DOI: 10.1057/palgrave.jors.2602470
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    References listed on IDEAS

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