Asymmetric N-Person Newsvendor Game with Overconfidence

Zhang Jian () and Shi Meng
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Zhang Jian: Inner Mongolia University of Finance and Economics
Shi Meng: Inner Mongolia University of Finance and Economics

A chapter in LISS 2023, 2024, pp 332-345 from Springer

Abstract: Abstract Overconfidence is a common behavior bias that affects the decision maker’s equilibrium strategy in competition. To explore the impact of overconfidence on the inventory game, this paper establishes an asymmetric newsvendor game model with N participators that considers overconfidence. The study found that when the newsvendor key ratios are identical the decision makers should ignore the impact of rival’s decisions. The pull-to-center effect can be observed in asymmetrical overconfident newsvendor games. Overconfident newsvendor may earn more when competing with the rational newsvendor, while the rational newsvendor may earn less. The overconfidence can offset the impact of competitive effect on order decisions. In addition, this paper explains the reason why the total order volume of the newsvendor game system is not lower than the total order volume of the centralized newsvendor system.

Keywords: overconfidence; asymmetric N-person game; substitute competition; newsvendor model (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnopch:978-981-97-4045-1_26

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DOI: 10.1007/978-981-97-4045-1_26

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