Behavioral Ordering, Competition and Profits: An Experimental Investigation

Quiroga, Bernardo F.; Moritz, Brent; Овчінніков, Антон

doi:10.1111/poms.13032

Cited by 12 publications

(10 citation statements)

References 30 publications

(92 reference statements)

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“…Another study evaluated profit differences between behavioral and management science-driven competitors. The results show human decision-makers obtaining a substantially lower profit than the equilibrium expected profit (Quiroga et al , 2019).…”

Section: Primary Research Clustersmentioning

confidence: 91%

“…Research utilizing the competing newsvendor problem has only recently appeared in the literature (Ovchinnikov et al , 2015). Since then, this subdomain has received considerable attention (Feng and Zhang, 2017; Quiroga et al , 2019; Zhao and Zhao, 2016; Zhao and Zhao, 2018). All these studies are focused on a duopolistic market (Kirshner and Ovchinnikov, 2018).…”

Section: Primary Research Clustersmentioning

confidence: 99%

“…It is important to highlight that within this domain there are structural and the behavioral causes that affect the BWE. In the practice there is a dearth of information which leads to suboptimal decisions (Quiroga et al , 2019). Academics must acknowledge that even rational decision makers will cause the BWE (due to variations observed in the above four causes beyond their control).…”

Section: Primary Research Clustersmentioning

confidence: 99%

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Inventory and ordering decisions: a systematic review on research driven through behavioral experiments

Perera

Fahimnia

Tokar

2020

IJOPM

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PurposeThe success of a supply chain is highly reliant on effective inventory and ordering decisions. This paper systematically reviews and analyzes the literature on inventory ordering decisions conducted using behavioral experiments to inform the state-of-the-art.Design/methodology/approachThis paper presents the first systematic review of this literature. We systematically identify a body of 101 papers from an initial pool of over 12,000.FindingsExtant literature and industry observations posit that decision makers often deviate from optimal ordering behavior prescribed by the quantitative models. Such deviations are often accompanied by excessive inventory costs and/or lost sales. Understanding how humans make inventory decisions is paramount to minimize the associated consequences. To address this, the field of behavioral operations management has produced a rich body of research on inventory decision-making using behavioral experiments. Our analysis identifies primary research clusters, summarizes key learnings and highlights opportunities for future research in this critical decision-making area.Practical implicationsThe findings will have a significant impact on future research on behavioral inventory ordering decisions while informing practitioners to reach better ordering decisions.Originality/valuePrevious systematic reviews have explored behavioral operations broadly or its subdisciplines such as judgmental forecasting. This paper presents a systematic review that specifically investigates the state-of-the-art of inventory ordering decisions using behavioral experiments.

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Section: Primary Research Clustersmentioning

confidence: 91%

Section: Primary Research Clustersmentioning

confidence: 99%

Section: Primary Research Clustersmentioning

confidence: 99%

See 1 more Smart Citation

Inventory and ordering decisions: a systematic review on research driven through behavioral experiments

Perera

Fahimnia

Tokar

2020

IJOPM

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“…Interestingly, they noted that human decision-makers do not respond to the behaviour (highly variable orders) of a competitor and concluded that human decision-makers fail to strategically anticipate and respond to other players' actions at an aggregate level. Quiroga et al (2016) investigated the impact of competitive newsvendor ordering behaviour on firm's profit and documented that profit losses under competition were 20–60%, while it was 1–5% in isolated cases. They explained that the large differences in profits are primarily driven by suboptimal ordering of behavioural decision-makers rather than by the sophistication of their management-science-driven competitors.…”

Section: Inventory Ordering Behaviour In Non-conventional Alternative...mentioning

confidence: 99%

Inventory decision-making biases: a review and suggestions for future research

Yamini

Gajanand

2021

BIJ

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PurposeThe paper provides a comprehensive overview of the biases in inventory decisions, under the umbrella of behavioural operations, considering research findings that used experimental methods. Research in this field has gained traction but, to the best of our knowledge, review articles that summarize these research findings are scarce. Hence, there is a need to synthesize the anomalies and biases reported in inventory decision-making literature to gain a more integrated understanding.Design/methodology/approachThis study reviews themes relevant to inventory and behavioural operations management from the articles published in recognized top-tier journals during the period between 2000 and 2020 with an aim to build a classification framework. Further, using a systematic review procedure, the relevant research studies are divided into sub-sections and appropriate search strategies are adopted to pleat more information on inventory ordering biases.FindingsThis study presents a classification framework by highlighting the factors influencing the biases in inventory decisions and describes the effects of utility preferences on the decision-making behaviour. It highlights the inventory ordering pattern under unconventional settings and also for different supply chain settings. This systematic review helps in identifying the research gap and in giving directions for future researchers.Originality/valueThe study presents a systematic review and detailed analysis of the research in inventory decision making through a behavioural lens. The study shows a clear direction of progress over the years, and implies new directions for looking beyond placing orders and for moving towards a more integrated approach while making supply chain decisions. It will be useful for researchers and practitioners working on newsvendor decisions, supply chain contracts, behavioural economics, behavioural operations management, bounded rationality theory and experimental economics.

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“…(), Quiroga et al. () consider a similar situation in which a behavioral newsvendor competes against a management‐science‐driven newsvendor and find that profit losses are orders‐of‐magnitude larger than existing literature. Zhao and Zhao () find that human newsvendors tend to order more in the competitive setting than a single newsvendor setting.…”

Section: Introductionmentioning

confidence: 99%

Modeling Strategic Behavior in The Competitive Newsvendor Problem: An Experimental Investigation

Feng

Zhang

2017

Production and Operations Management

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This study experimentally investigates ordering behavior in the competitive newsvendor problem. We consider a duopoly market setting with two identical newsvendors selling the same perishable goods in a common market. Our experimental results show that average observed orders systematically deviate from the Nash equilibrium, and exhibit a similar pull‐to‐center pattern as in the classic non‐competitive newsvendor experiments: average orders fall below the Nash equilibrium in the high‐margin condition, and above the Nash equilibrium in the low‐margin condition. More importantly, the observed orders in the duopoly market are significantly higher than that in the non‐competitive newsvendor market, even in situations where standard inventory models predict no difference. We explain the ordering behavior using a strategic experience‐weighted attraction (EWA) model, which captures players' propensities for strategic thinking in game settings. Our empirical analysis suggests that the strategic EWA model generates more accurate predictions of future ordering behavior than an existing linear adaptive model without concerning strategic thinking. Further analysis shows that individuals are heterogeneous in their propensities to be a strategic player. Our research indicates the importance of modeling strategic behavior when analyzing behavioral decisions in competitive (game) environments.

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Behavioral Ordering, Competition and Profits: An Experimental Investigation

Cited by 12 publications

References 30 publications

Inventory and ordering decisions: a systematic review on research driven through behavioral experiments

Inventory and ordering decisions: a systematic review on research driven through behavioral experiments

Inventory decision-making biases: a review and suggestions for future research

Modeling Strategic Behavior in The Competitive Newsvendor Problem: An Experimental Investigation

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