Decision-making and the newsvendor problem: An experimental study

U. Benzion, Y. Cohen, R. Peled, T. Shavit

Research output: Contribution to journalArticlepeer-review

123 Scopus citations

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.

Original languageEnglish
Pages (from-to)1281-1287
Number of pages7
JournalJournal of the Operational Research Society
Volume59
Issue number9
DOIs
StatePublished - 1 Jan 2008
Externally publishedYes

Keywords

  • Behaviour
  • Inventory
  • Learning
  • Management
  • Optimization

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