Behavioral Decision Making in the (Q,R) Purchasing Model: An Experimental Study
Article first published online: 20 JUN 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Managerial and Decision Economics
Volume 35, Issue 5, pages 357–370, July 2014
How to Cite
Shavit, T., Cohen, Y., Bogair, R. and Benzion, U. (2014), Behavioral Decision Making in the (Q,R) Purchasing Model: An Experimental Study. Manage. Decis. Econ., 35: 357–370. doi: 10.1002/mde.2628
- Issue published online: 11 JUN 2014
- Article first published online: 20 JUN 2013
- Manuscript Accepted: 1 MAY 2013
- Manuscript Revised: 30 APR 2013
- Manuscript Received: 21 MAR 2012
This paper presents and analyzes the results of a decision-making experiment in inventory management under uncertainty. The experiment included 81 participants who played the role of a small car importer facing random demand as in the (Q,R) model. The results show strong evidence of learning and convergence, and the average reorder point (R) closely approaches the optimal level for maximizing profits. However, the participants' decisions are still biased by realizations of extreme values of demand and loss of potential sales. We argue that participants are affected by recency, loss aversion, and, possibly, their own risk aversion. Copyright © 2013 John Wiley & Sons, Ltd.