Newsvendor pull-to-center reconsidered

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 individ...

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Bibliographic Details
Published inDecision Support Systems Vol. 58; pp. 68 - 73
Main Authors Lau, Nelson, Hasija, Sameer, Bearden, J. Neil
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier Sequoia S.A 01.02.2014
Subjects
Aggregates
Decision making
Decision support systems
Demand
Mathematical models
Operations management
Probability distribution
Profit maximization
Statistics
Studies
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Summary: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 a 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.
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ISSN:0167-9236
1873-5797
DOI:10.1016/j.dss.2012.12.041