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Decision-Making and the Newsvendor Problem – An Experimental Study

Author

Listed:
  • Uri Ben-Zion

    (Dept. of Economics, Ben-Gurion University of the Negev, Israel)

  • Yuval Cohen

    (Department of Management and Economics, The Open University of Israel)

  • Ruth Peled

    ((M.A.), Student, Dept. of Economics, Ben-Gurion University of the Negev, Israel)

  • TAL SHAVIT

    (Department of Economics, Ben-Gurion University of the Negev, Israel)

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.

Suggested Citation

  • Uri Ben-Zion & Yuval Cohen & Ruth Peled & TAL SHAVIT, 2007. "Decision-Making and the Newsvendor Problem – An Experimental Study," Working Papers 0711, Ben-Gurion University of the Negev, Department of Economics.
    • Handle: RePEc:bgu:wpaper:0711
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    References listed on IDEAS

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