Decision-Making and the Newsvendor Problem – An Experimental Study

Uri Ben-Zion (), Yuval Cohen (), Ruth Peled () and Tal Shavit ()
Additional contact information
Uri Ben-Zion: Dept. of Economics, Ben-Gurion University of the Negev, Israel
Yuval Cohen: Department of Management and Economics, The Open University of Israel
Ruth Peled: (M.A.), Student, Dept. of Economics, Ben-Gurion University of the Negev, Israel

No 711, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: This paper investigates repetitive purchase decisions of perishable items in the face of uncertain demand (the newsvendor problem). The experimental design includes: high, or low profit levels; and uniform, or normal demand distributions. The results show that in all cases both learning and convergence occur and are effected by: (1) the mean demand; (2) the order-size of the maximal expected profit; and (3) the demand level of the immediately preceding round. In all cases of the experimental design, the purchase order converges to a value between the mean demand and the quantity for maximizing the expected profit.

Keywords: Inventory; Learning; Behavior; Management; Optimization (search for similar items in EconPapers)
Pages: 23pages
Date: 2007
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Citations: View citations in EconPapers (21)

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Journal Article: Decision-making and the newsvendor problem: an experimental study (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:0711

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