Statistical testing of bounded rationality with applications to the newsvendor model

Jan Ubøe, Jonas Andersson, Kurt Jörnsten, Jostein Lillestøl and Leif Sandal ()

European Journal of Operational Research, 2017, vol. 259, issue 1, 251-261

Abstract: In this paper we define bounded rationality in terms of probabilistic cost efficiency. This establishes a framework where bounded rationality can be examined rigorously by statistical methods. We apply this theory to data from laboratory experiments on the newsvendor model. We enter into a theoretical discussion of the classical pull-to-center effect and explain why underorders are typically larger than overorders.

Keywords: Behavioral OR; Experimental economics; Bounded rationality; Probabilistic cost efficiency (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:259:y:2017:i:1:p:251-261

DOI: 10.1016/j.ejor.2016.10.007

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