How to Compete Against a Behavioral Newsvendor
Anton Ovchinnikov, Brent Moritz, Bernardo F. Quiroga
Production and Operations Management · 2015 · Volume 24 · Issue 11
Abstract
We investigate newsvendor ordering behavior under competition. We present a laboratory experiment that documents the behavioral ordering regularities in competitive newsvendor environments, and an analytical model extending the standard theory of newsvendor competition by including an optimal best-response policy for competing with a behaviorally biased newsvendor. We test the effectiveness of this policy using an out-of-sample experiment and find that it results in improved market share, service level and profitability.
Keywords
newsvendor, behavioral operations management, experimental economics, competition
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