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Pull-to-center is not just for newsvendors

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  • Zuzana Brokesova
  • Cary Deck
  • Jana Peliova

Abstract

The pull-to-center effect is a systematically observed suboptimal behavior in newsvendor experiments. Various explanations have been forward for this phenomenon, some of which are based on structural properties of the task while others are based upon the inventory context of the problem. To help distinguish between these two types of explanations, we compare behavior in a newsvendor game to behavior in a new, mathematically isomorphic, price gouging game. Our laboratory experiments replicate the standard results for newsvendors and yield the equivalent pattern in the price gouging game. This suggests previously observed newsvendor behavior is driven by structural aspects of the task consistent with models like prospect theory and impulse balance rather than context specific explanations pertaining to inventory management.

Suggested Citation

  • Zuzana Brokesova & Cary Deck & Jana Peliova, 2022. "Pull-to-center is not just for newsvendors," PLOS ONE, Public Library of Science, vol. 17(2), pages 1-16, February.
    • Handle: RePEc:plo:pone00:0264183
    DOI: 10.1371/journal.pone.0264183
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    References listed on IDEAS

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