Decision-making and the newsvendor problem: an experimental study

This paper investigates repetitive purchase decisions of perishable items in the face of uncertain demand (the newsvendor problem). The experimental design includes: high, or low profit levels; and uniform, or normal demand distributions. The results show that in all cases both learning and convergence occur and are effected by: (1) the mean demand; (2) the order-size of the maximal expected profit; and (3) the demand level of the immediately preceding round. In all cases of the experimental design, the purchase order converges to a value between the mean demand and the quantity for maximizing the expected profit. Journal of the Operational Research Society (2008) 59, 1281–1287. doi:10.1057/palgrave.jors.2602470 Published online 11 July 2007