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

• 成果类型: Article
• 署名作者: Feng, Tianjun; Zhang, Yinghao
• 署名单位: Fudan University; University System of Ohio; University of Cincinnati
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12683
• 发表日期: 2017
• 页码: 1383-1398
• 关键词: competitive newsvendor; Nash equilibrium; experience-weighted attraction; strategic behavior; Behavioral operations management

摘要

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 insituations 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.