Impulse balance in the newsvendor game

Axel Ockenfels and Reinhard Selten

Games and Economic Behavior, 2014, vol. 86, issue C, 237-247

Abstract: One striking behavioral phenomenon is the “pull-to-center” bias in the newsvendor game: facing stochastic demand, subjects tend to order quantities between the expected profit maximizing quantity and mean demand. We show that the impulse balance equilibrium, which is based on a simple ex-post rationality principle along with an equilibrium condition, predicts the pull-to-center bias and other, more subtle observations in the laboratory newsvendor game.

Keywords: Newsvendor game; Impulse balance equilibrium; Ex-post rationality; Economic cognition; Behavioral operations management; Experiment (search for similar items in EconPapers)
JEL-codes: C91 D03 D81 M11 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:86:y:2014:i:c:p:237-247

DOI: 10.1016/j.geb.2014.03.012

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