Newsvendors tackle the newsvendor problem
Interfaces
IEEE Transactions on Software Engineering
Identifying demand sources that minimize risk for a selective newsvendor
WSC '05 Proceedings of the 37th conference on Winter simulation
The MSOM Society Student Paper Competition: Extended Abstracts of 2005 Winners
Manufacturing & Service Operations Management
Bilevel newsvendor models considering retailer with CVaR objective
Computers and Industrial Engineering
Anchor Selection and Group Dynamics in Newsvendor Decisions---A Note
Decision Analysis
Contracting in Supply Chains: A Laboratory Investigation
Management Science
Study on new coordination mechanisms of generalized supply chains with loss-averse agents
CCDC'09 Proceedings of the 21st annual international conference on Chinese control and decision conference
CCDC'09 Proceedings of the 21st annual international conference on Chinese control and decision conference
Manufacturing & Service Operations Management
Do Random Errors Explain Newsvendor Behavior?
Manufacturing & Service Operations Management
Trust in Forecast Information Sharing
Management Science
Herding in Queues with Waiting Costs: Rationality and Regret
Manufacturing & Service Operations Management
Demand Forecasting Behavior: System Neglect and Change Detection
Management Science
What Is Interesting in Operations Management?
Manufacturing & Service Operations Management
Aspirational Preferences and Their Representation by Risk Measures
Management Science
Managers and Students as Newsvendors
Management Science
Biased Judgment in Censored Environments
Management Science
Newsvendor pull-to-center reconsidered
Decision Support Systems
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In the newsvendor problem a decision maker orders inventory before a one period selling season with stochastic demand. If too much is ordered, stock is left over at the end of the period, whereas if too little is ordered, sales are lost. The expected profit-maximizing order quantity is well known, but little is known about how managers actually make these decisions. We describe two experiments that investigate newsvendor decisions across different profit conditions. Results from these studies demonstrate that choices systematically deviate from those that maximize expected profit. Subjects order too few of high-profit products and too many of low-profit products. These results are not consistent with risk-aversion, risk-seeking preferences, Prospect Theory preferences, waste aversion, stockout aversion, or the consequences of underestimating opportunity costs. Two explanations are consistent with the data. One, subjects behave as if their utility function incorporates a preference to reduce ex-post inventory error, the absolute difference between the chosen quantity and realized demand. Two, subjects suffer from the anchoring and insufficient adjustment bias. Feedback and training did not mitigate inventory order errors. We suggest techniques to improve decision making.