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Behavioral Decision Making in the (Q,R) Purchasing Model: An Experimental Study

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  • Tal Shavit
  • Yuval Cohen
  • Ravid Bogair
  • Uri Benzion

Abstract

This paper presents and analyzes the results of a decision‐making experiment in inventory management under uncertainty. The experiment included 81 participants who played the role of a small car importer facing random demand as in the (Q,R) model. The results show strong evidence of learning and convergence, and the average reorder point (R) closely approaches the optimal level for maximizing profits. However, the participants' decisions are still biased by realizations of extreme values of demand and loss of potential sales. We argue that participants are affected by recency, loss aversion, and, possibly, their own risk aversion. Copyright © 2013 John Wiley & Sons, Ltd.

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  • Tal Shavit & Yuval Cohen & Ravid Bogair & Uri Benzion, 2014. "Behavioral Decision Making in the (Q,R) Purchasing Model: An Experimental Study," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 35(5), pages 357-370, July.
    • Handle: RePEc:wly:mgtdec:v:35:y:2014:i:5:p:357-370
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    Cited by:

    1. Jinrui Pan & Jason Shachat & Sijia Wei, 2020. "Cognitive reflection and economic order quantity inventory management: An experimental investigation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(6), pages 998-1009, September.

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