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Behavioral Ordering, Competition and Profits: An Experimental Investigation

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  • Bernardo F. Quiroga
  • Brent Moritz
  • Anton Ovchinnikov

Abstract

We investigate the impact of behavioral ordering on profits under competition. Specifically, we use controlled laboratory experiments to evaluate the differences in profits between a behavioral competitor (where a human places orders), and a management science‐driven competitor (where orders are placed according to one of several plausible policies based on existing literature and managerial practice). Unlike the full‐information game‐theoretic models that assume rational decision‐makers, these policies mimic practical situations by using less information and do not assume that their human competitors make fully rational decisions. Most prior literature focuses on non‐competitive settings, where behaviorally biased deviations from optimal order quantities result in small expected profit losses. In contrast, under competition, we find that human decision‐makers receive a substantially lower profit than the equilibrium expected profit, even as their competitors receive substantially higher profit.

Suggested Citation

  • Bernardo F. Quiroga & Brent Moritz & Anton Ovchinnikov, 2019. "Behavioral Ordering, Competition and Profits: An Experimental Investigation," Production and Operations Management, Production and Operations Management Society, vol. 28(9), pages 2242-2258, September.
  • Handle: RePEc:bla:popmgt:v:28:y:2019:i:9:p:2242-2258
    DOI: 10.1111/poms.13032
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    Cited by:

    1. Siqi Ma & Li Hao & John A. Aloysius, 2021. "Women are an Advantage in Supply Chain Collaboration and Efficiency," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1427-1441, May.
    2. Silbermayr, Lena, 2020. "A review of non-cooperative newsvendor games with horizontal inventory interactions," Omega, Elsevier, vol. 92(C).

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