Behavioral Ordering, Competition and Profits: An Experimental Investigation

Bernardo F. Quiroga, Brent B. Moritz, Anton Ovchinnikov

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

We investigate the impact of behavioral ordering on profits under competition. Specifically, we use controlled laboratory experiments to evaluate the differences in profits between a behavioral competitor (where a human places orders), and a management science-driven competitor (where orders are placed according to one of several plausible policies based on existing literature and managerial practice). Unlike the full-information game-theoretic models that assume rational decision-makers, these policies mimic practical situations by using less information and do not assume that their human competitors make fully rational decisions. Most prior literature focuses on non-competitive settings, where behaviorally biased deviations from optimal order quantities result in small expected profit losses. In contrast, under competition, we find that human decision-makers receive a substantially lower profit than the equilibrium expected profit, even as their competitors receive substantially higher profit.

Original languageEnglish (US)
Pages (from-to)2242-2258
Number of pages17
JournalProduction and Operations Management
Volume28
Issue number9
DOIs
StatePublished - Sep 1 2019

All Science Journal Classification (ASJC) codes

  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

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