Newsvendor Pull-to-Center Reconsidered

14 Pages Posted: 14 Oct 2011

See all articles by Nelson Lau

Nelson Lau

INSEAD - Decision Sciences

Joseph Neil Bearden

INSEAD - Decision Sciences

Sameer Hasija

INSEAD - Technology and Operations Management

Date Written: October 14, 2011

Abstract

In the newsvendor problem, a pull-to-center effect has been asserted, whereby subjects are said to order a quantity between the mean of the demand distribution and the expected profit-maximizing quantity. These claims have only been examined using group-level aggregate statistics. Looking at individual-level data from an previously published study and a new experiment, the current paper shows that while pull-to-center is present in aggregate data, it does not adequately describe the population of individual decision makers, who are found to be highly heterogeneous. Methodological implications and future research directions are discussed.

Keywords: Behavioral Operations Management, Newsvendor Problem, Pull-to-center, Measurement and Methodology, Experimental Economics

Suggested Citation

Lau, Nelson and Bearden, Joseph Neil and Hasija, Sameer, Newsvendor Pull-to-Center Reconsidered (October 14, 2011). INSEAD Working Paper No. 2011/108/DS/TOM. Available at SSRN: https://ssrn.com/abstract=1944147 or http://dx.doi.org/10.2139/ssrn.1944147

Nelson Lau (Contact Author)

INSEAD - Decision Sciences ( email )

United States

Joseph Neil Bearden

INSEAD - Decision Sciences ( email )

United States

Sameer Hasija

INSEAD - Technology and Operations Management ( email )

Boulevard de Constance
77 305 Fontainebleau Cedex
France

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