How to Compete Against a Behavioral Newsvendor

Anton Ovchinnikov; Brent Moritz; Bernardo F. Quiroga

doi:10.1111/poms.12361

How to Compete Against a Behavioral Newsvendor

Anton Ovchinnikov, Brent Moritz, Bernardo F. Quiroga

Supply Chain and Information Systems

Research output: Contribution to journal › Article › peer-review

48 Scopus citations

Abstract

We investigate newsvendor ordering behavior under competition. We present a laboratory experiment that documents the behavioral ordering regularities in competitive newsvendor environments, and an analytical model extending the standard theory of newsvendor competition by including an optimal best-response policy for competing with a behaviorally biased newsvendor. We test the effectiveness of this policy using an out-of-sample experiment and find that it results in improved market share, service level and profitability.

Original language	English (US)
Pages (from-to)	1783-1793
Number of pages	11
Journal	Production and Operations Management
Volume	24
Issue number	11
DOIs	https://doi.org/10.1111/poms.12361
State	Published - Nov 1 2015

All Science Journal Classification (ASJC) codes

Management Science and Operations Research
Industrial and Manufacturing Engineering
Management of Technology and Innovation

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1111/poms.12361

Cite this

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title = "How to Compete Against a Behavioral Newsvendor",

abstract = "We investigate newsvendor ordering behavior under competition. We present a laboratory experiment that documents the behavioral ordering regularities in competitive newsvendor environments, and an analytical model extending the standard theory of newsvendor competition by including an optimal best-response policy for competing with a behaviorally biased newsvendor. We test the effectiveness of this policy using an out-of-sample experiment and find that it results in improved market share, service level and profitability.",

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AB - We investigate newsvendor ordering behavior under competition. We present a laboratory experiment that documents the behavioral ordering regularities in competitive newsvendor environments, and an analytical model extending the standard theory of newsvendor competition by including an optimal best-response policy for competing with a behaviorally biased newsvendor. We test the effectiveness of this policy using an out-of-sample experiment and find that it results in improved market share, service level and profitability.

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How to Compete Against a Behavioral Newsvendor

Abstract

All Science Journal Classification (ASJC) codes

UN SDGs

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