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On learning process of a newsvendor with censored demand information

Author

Listed:
  • Yingshuai Zhao

    (University of Cologne)

  • Xiaobo Zhao

    (Tsinghua University)

  • Zuo-Jun Max Shen

    (University of California)

Abstract

A behavioural study on the newsvendor problem without demand distribution knowledge or realized demands is conducted. We configure a censored-information scenario, where only sales data in history are provided. With laboratory experiments, we analyse participants ordering levels and ordering oscillations over time. It is observed that participants perform a significant learning process in the censored-information scenario. Moreover, we find that participants make orders by anchoring on the previous-period sales and adjusting to an adapted inventory level. On the basis of the observations, we propose an exponential-type learning (EXP) model to describe the behaviour of decision makers. Comparing with a chasing model that is popularly used in the full-information scenario, the EXP model is more recommended in the censored-information scenario.

Suggested Citation

  • Yingshuai Zhao & Xiaobo Zhao & Zuo-Jun Max Shen, 2016. "On learning process of a newsvendor with censored demand information," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(9), pages 1200-1211, September.
    • Handle: RePEc:pal:jorsoc:v:67:y:2016:i:9:d:10.1057_jors.2016.18
    DOI: 10.1057/jors.2016.18
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    References listed on IDEAS

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