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Cognitive reflection and economic order quantity inventory management: An experimental investigation

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  • Jinrui Pan
  • Jason Shachat
  • Sijia Wei

Abstract

We use laboratory experiments to evaluate the effects of individuals' cognitive abilities on their behavior in a finite horizon economic order quantity model. Participants' abilities to balance intuitive judgment with cognitive deliberations are measured by the cognitive reflection test (CRT). Participants then complete a sequence of ordering decisions. Our results show that participants with higher CRT scores on average earn greater profit and choose more effective policies. However, these gaps are transitory as participants with lower CRT scores exhibit faster learning. We also show gender differences in performance do not hold when we control for individual CRT scores.

Suggested Citation

  • Jinrui Pan & Jason Shachat & Sijia Wei, 2020. "Cognitive reflection and economic order quantity inventory management: An experimental investigation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(6), pages 998-1009, September.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:6:p:998-1009
    DOI: 10.1002/mde.3154
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    References listed on IDEAS

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    2. Pan, Jinrui & Shachat, Jason & Wei, Sijia, 2018. "Cognitive stress and learning Economic Order Quantity (EOQ) inventory management: An experimental investigation," MPRA Paper 86221, University Library of Munich, Germany.
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    Cited by:

    1. Pan, Jinrui & Shachat, Jason & Wei, Sijia, 2018. "Cognitive stress and learning Economic Order Quantity (EOQ) inventory management: An experimental investigation," MPRA Paper 93214, University Library of Munich, Germany.
    2. Jinrui Pan & Jason Shachat & Sijia Wei, 2022. "Cognitive Stress and Learning Economic Order Quantity Inventory Management: An Experimental Investigation," Decision Analysis, INFORMS, vol. 19(3), pages 229-254, September.
    3. Yuan Jiang & Xu Guan & Yao Tang & Simiao Chen, 2022. "Strategic stocking for new products to signal quality information," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(1), pages 65-83, January.

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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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