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Strategic customer behavior facing possible stockout: An experimental study

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  • Song, Yanan
  • Zhao, Xiaobo

Abstract

This paper studies strategic customer behavior in a monopolistic seller system. Given the stock quantity and the selling prices, a customer chooses either to buy at the full price to certainly obtain a product or to wait for a discount with the risk of stockout. We model the behavior of strategic customers as a customer-game. It is shown that the customer-game may have multiple Nash equilibria. Specifically, in the condition of weak incentive compatibility, the trembling hand perfect equilibrium is “all-wait”, which is inconsistent with the “all-buy” assumption in the literature. We conduct laboratory experiments to investigate behavior of strategic customers. The results show that customers' behaviors exhibit a deviation from Nash equilibria. Using a framework of quantal response equilibrium, we develop behavioral models to effectively characterize the behavior of strategic customers.

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  • Song, Yanan & Zhao, Xiaobo, 2016. "Strategic customer behavior facing possible stockout: An experimental study," International Journal of Production Economics, Elsevier, vol. 180(C), pages 57-67.
    • Handle: RePEc:eee:proeco:v:180:y:2016:i:c:p:57-67
    DOI: 10.1016/j.ijpe.2016.07.006
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