Decision Biases in Revenue Management: Some Behavioral Evidence

We study a problem of selling a fixed number of goods over a finite and known horizon. After presenting a procedure for computing optimal decision policies and some numerical results on a simple heuristic policy for the problem, we describe results from three experiments involving financially motivated subjects. The experiments reveal that decision makers employ policies of the same form of the optimal policy. However, they show systematic biases to demand too much when they have many units to sell and too little when they have few to sell, resulting in significant revenue losses. (Behavioral Operations; Revenue Management; Dynamic Pricing; Decision Bias; Heuristics)