How to Compete Against a Behavioral Newsvendor

Ovchinnikov, Anton; Moritz, Brent; Quiroga, Bernardo F.

doi:10.2139/ssrn.2236503

How to Compete Against a Behavioral Newsvendor

Ovchinnikov, A. , Moritz, B. and Quiroga, B. F. (2015), How to Compete Against a Behavioral Newsvendor. Prod Oper Manag, 24: 1783-1793. doi:10.1111/poms.12361

Posted: 20 Mar 2013 Last revised: 20 Jun 2019

See all articles by Anton Ovchinnikov

Anton Ovchinnikov

Smith School of Business - Queen's University; INSEAD - Decision Sciences

Bernardo F. Quiroga

University of Massachusetts Lowell - Department of Operations and Information Systems

Date Written: July 29, 2014

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.

Keywords: Newsvendor, Behavioral Operations Management, Experimental Economics, Competition

Suggested Citation: Suggested Citation

Ovchinnikov, Anton and Moritz, Brent and Quiroga, Bernardo F., How to Compete Against a Behavioral Newsvendor (July 29, 2014). Ovchinnikov, A. , Moritz, B. and Quiroga, B. F. (2015), How to Compete Against a Behavioral Newsvendor. Prod Oper Manag, 24: 1783-1793. doi:10.1111/poms.12361, Available at SSRN: https://ssrn.com/abstract=2236503 or http://dx.doi.org/10.2139/ssrn.2236503