Newsvendor Problem Experiments: Riskiness of the Decisions and Learning by Experience

Authors

  • Victor Arshavskiy Center for Technology and Economics Development, NYU Abu Dhabi and Graduate School of Management, Saint Petersburg State University
  • Vitaliy Okulov Graduate School of management, St. Petersburg State University
  • Alena Smirnova Graduate School of management, St. Petersburg State University

DOI:

https://doi.org/10.18533/ijbsr.v4i5.500

Keywords:

Newsvendor Problem, competition, risk, rationality, learning by experience

Abstract

We describe the results of three controlled (multi–rounds) experiments in which the players made decisions on purchasing products by fixed price and further selling under demand uncertainty. In our experiments we have introduced the competition; if a player has a lot of product ordered, he could win over buyers away from his competitor. We study the rationality of decisions and the learning by experience. Analysis shows that in each round the average decision of players was more aggressive (risky) than the optimal decision obtained under the assumption that the players maximize the expected profit. But by the end of the experiments the variance of the individual decisions decreased, so the choice of decision was more confident and conscious.

Author Biographies

  • Victor Arshavskiy, Center for Technology and Economics Development, NYU Abu Dhabi and Graduate School of Management, Saint Petersburg State University
    Research Scientist
  • Vitaliy Okulov, Graduate School of management, St. Petersburg State University
    Department of Finance and Accounting, Associate Professor

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Published

2014-05-20

Issue

Vol. 4 No. 5 (2014): May

Section

Article

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