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Newsvendor Problem Experiments: Riskiness of the Decisions and Learning by Experience

Author

Listed:
  • Arshavskiy V.

    (Research Scientist,Center for Technology and Economics Development, NYU Abu Dhabi and Graduate School of Management, Saint–Petersburg State University,)

  • Okulov V.

    (Associate Professor, Department of Finance and Accounting, Graduate School of Management, Saint–Petersburg State University,)

  • Smirnova A.

    (Master in Management,Graduate School of Management,Saint–Petersburg State University,)

Abstract

We describe the results of three controlled (multi–rounds) experiments in which the players made decisions on purchasing products by fixed price and further selling under demand uncertainty. In our experiments we have introduced the competition; if aplayer has a lot of product ordered, he could win over buyers away from his competitor. We study the rationality of decisions and the learning by experience. Analysis shows that in each round the average decision of players was more aggressive (risky) than the optimal decision obtained under the assumption that the players maximize the expected profit. But by the end of the experiments the variance of the individual decisions decreased, so the choice of decision was more confident and conscious.

Suggested Citation

  • Arshavskiy V. & Okulov V. & Smirnova A., 2014. "Newsvendor Problem Experiments: Riskiness of the Decisions and Learning by Experience," International Journal of Business and Social Research, LAR Center Press, vol. 4(5), pages 137-150, May.
    • Handle: RePEc:lrc:larijb:v:4:y:2014:i:5:p:137-150
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    References listed on IDEAS

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