Behavioral Ordering, Competition and Profits: An Experimental Investigation

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

Research output: Contribution to journalArticle

1 Citation (Scopus)

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

Fingerprint

Profitability
Management science
Profit
Competitors
Experiments
Decision maker

All Science Journal Classification (ASJC) codes

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

Cite this

Quiroga, Bernardo F. ; Moritz, Brent B. ; Ovchinnikov, Anton. / Behavioral Ordering, Competition and Profits : An Experimental Investigation. In: Production and Operations Management. 2019 ; Vol. 28, No. 9. pp. 2242-2258.
@article{4c62b0c26aa843028fde5b11e80dc16a,
title = "Behavioral Ordering, Competition and Profits: An Experimental Investigation",
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.",
author = "Quiroga, {Bernardo F.} and Moritz, {Brent B.} and Anton Ovchinnikov",
year = "2019",
month = "9",
day = "1",
doi = "10.1111/poms.13032",
language = "English (US)",
volume = "28",
pages = "2242--2258",
journal = "Production and Operations Management",
issn = "1059-1478",
publisher = "Wiley-Blackwell",
number = "9",

}

Behavioral Ordering, Competition and Profits : An Experimental Investigation. / Quiroga, Bernardo F.; Moritz, Brent B.; Ovchinnikov, Anton.

In: Production and Operations Management, Vol. 28, No. 9, 01.09.2019, p. 2242-2258.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Behavioral Ordering, Competition and Profits

T2 - An Experimental Investigation

AU - Quiroga, Bernardo F.

AU - Moritz, Brent B.

AU - Ovchinnikov, Anton

PY - 2019/9/1

Y1 - 2019/9/1

N2 - 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.

AB - 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.

UR - http://www.scopus.com/inward/record.url?scp=85066465360&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85066465360&partnerID=8YFLogxK

U2 - 10.1111/poms.13032

DO - 10.1111/poms.13032

M3 - Article

AN - SCOPUS:85066465360

VL - 28

SP - 2242

EP - 2258

JO - Production and Operations Management

JF - Production and Operations Management

SN - 1059-1478

IS - 9

ER -