Decision-Making and the Newsvendor Problem – An Experimental Study
AbstractThis 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.
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Bibliographic InfoPaper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 0711.
Date of creation: 2007
Date of revision:
Inventory; Learning; Behavior; Management; Optimization;
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- Maurice E. Schweitzer & Gérard P. Cachon, 2000. "Decision Bias in the Newsvendor Problem with a Known Demand Distribution: Experimental Evidence," Management Science, INFORMS, vol. 46(3), pages 404-420, March.
- Gary E. Bolton & Elena Katok, 2008. "Learning by Doing in the Newsvendor Problem: A Laboratory Investigation of the Role of Experience and Feedback," Manufacturing & Service Operations Management, INFORMS, vol. 10(3), pages 519-538, September.
- Halkos, George & Kevork, Ilias, 2012. "Unbiased estimation of maximum expected profits in the Newsvendor Model: a case study analysis," MPRA Paper 40724, University Library of Munich, Germany.
- Shen, Houcai & Pang, Zhan & Cheng, T.C.E., 2011. "The component procurement problem for the loss-averse manufacturer with spot purchase," International Journal of Production Economics, Elsevier, vol. 132(1), pages 146-153, July.
- Nils Rudi & David Drake, 2009. "Observation bias: The impact of demand censoring on newsvendor level and adjustment behavior," Harvard Business School Working Papers 12-042, Harvard Business School, revised Dec 2011.
- Halkos, George & Kevork, Ilias, 2012. "The classical newsvendor model under normal demand with large coefficients of variation," MPRA Paper 40414, University Library of Munich, Germany.
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