Impulse balance in the newsvendor game |
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| Affiliation: | 1. Kuehne Logistics University, Hamburg, Germany;2. WHU – Otto Beisheim School of Management, Vallendar, Germany;3. Operations Research & Logistics Group, Wageningen University, the Netherlands;1. Data and Web Science Group, University of Mannheim, B6 26, Mannheim 68159, Germany;2. Business School, University of Mannheim, Schloss, Mannheim 68131, Germany |
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| 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. |
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| Keywords: | Newsvendor game Impulse balance equilibrium Ex-post rationality Economic cognition Behavioral operations management Experiment |
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