A Systematic Analysis and Experimental Verification of Joint Pricing and Inventory Strategies in Competitive Newsvendor Environments
This study examined joint pricing and inventory decisions in a competitive newsvendor environment using a combination of theoretical modeling and experimental methods. We developed a newsvendor model with price competition and inventory decisions. Participants in a laboratory experiment made simulta...
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MDPI AG
2024-12-01
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| Online Access: | https://www.mdpi.com/2079-8954/13/1/18 |
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| author | Mengmeng Shi Yue Liu Shaohui Wu |
| author_facet | Mengmeng Shi Yue Liu Shaohui Wu |
| author_sort | Mengmeng Shi |
| collection | DOAJ |
| description | This study examined joint pricing and inventory decisions in a competitive newsvendor environment using a combination of theoretical modeling and experimental methods. We developed a newsvendor model with price competition and inventory decisions. Participants in a laboratory experiment made simultaneous pricing and inventory decisions over 50 rounds, with their opponents’ identities unknown. We theoretically proved the existence of a mixed Nash equilibrium, i.e., different equilibrium prices corresponded to different optimal inventory quantities. The experimental results show that about <inline-formula><math xmlns="http://www.w3.org/1998/Math/MathML" display="inline"><semantics><mrow><mn>50</mn><mo>%</mo></mrow></semantics></math></inline-formula> of the joint pricing and inventory decisions were consistent with the predictions of the equilibrium model. However, systematic deviations from the equilibrium predictions were also observed at the aggregate level. We developed a novel context-dependent quantal response equilibrium model (QRE) for the bivariate newsvendor game setting. The context-dependent quantal response equilibrium model fit the observed decision biases remarkably well, and it was significantly better than the basic QRE model. This research provides insights into decision biases in complex systems and practical guidance for project planning and management. |
| format | Article |
| id | doaj-art-e3602baa24ca455293eef05cb29ee30f |
| institution | Kabale University |
| issn | 2079-8954 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Systems |
| spelling | doaj-art-e3602baa24ca455293eef05cb29ee30f2025-01-24T13:50:30ZengMDPI AGSystems2079-89542024-12-011311810.3390/systems13010018A Systematic Analysis and Experimental Verification of Joint Pricing and Inventory Strategies in Competitive Newsvendor EnvironmentsMengmeng Shi0Yue Liu1Shaohui Wu2School of Management, Harbin Institute of Technology, Harbin 150001, ChinaCollege of Foreign Languages, National University of Defense Technology, Nanjing 210039, ChinaSchool of Management, Harbin Institute of Technology, Harbin 150001, ChinaThis study examined joint pricing and inventory decisions in a competitive newsvendor environment using a combination of theoretical modeling and experimental methods. We developed a newsvendor model with price competition and inventory decisions. Participants in a laboratory experiment made simultaneous pricing and inventory decisions over 50 rounds, with their opponents’ identities unknown. We theoretically proved the existence of a mixed Nash equilibrium, i.e., different equilibrium prices corresponded to different optimal inventory quantities. The experimental results show that about <inline-formula><math xmlns="http://www.w3.org/1998/Math/MathML" display="inline"><semantics><mrow><mn>50</mn><mo>%</mo></mrow></semantics></math></inline-formula> of the joint pricing and inventory decisions were consistent with the predictions of the equilibrium model. However, systematic deviations from the equilibrium predictions were also observed at the aggregate level. We developed a novel context-dependent quantal response equilibrium model (QRE) for the bivariate newsvendor game setting. The context-dependent quantal response equilibrium model fit the observed decision biases remarkably well, and it was significantly better than the basic QRE model. This research provides insights into decision biases in complex systems and practical guidance for project planning and management.https://www.mdpi.com/2079-8954/13/1/18newsvendor competitionprice–inventory gamequantal response equilibrium |
| spellingShingle | Mengmeng Shi Yue Liu Shaohui Wu A Systematic Analysis and Experimental Verification of Joint Pricing and Inventory Strategies in Competitive Newsvendor Environments Systems newsvendor competition price–inventory game quantal response equilibrium |
| title | A Systematic Analysis and Experimental Verification of Joint Pricing and Inventory Strategies in Competitive Newsvendor Environments |
| title_full | A Systematic Analysis and Experimental Verification of Joint Pricing and Inventory Strategies in Competitive Newsvendor Environments |
| title_fullStr | A Systematic Analysis and Experimental Verification of Joint Pricing and Inventory Strategies in Competitive Newsvendor Environments |
| title_full_unstemmed | A Systematic Analysis and Experimental Verification of Joint Pricing and Inventory Strategies in Competitive Newsvendor Environments |
| title_short | A Systematic Analysis and Experimental Verification of Joint Pricing and Inventory Strategies in Competitive Newsvendor Environments |
| title_sort | systematic analysis and experimental verification of joint pricing and inventory strategies in competitive newsvendor environments |
| topic | newsvendor competition price–inventory game quantal response equilibrium |
| url | https://www.mdpi.com/2079-8954/13/1/18 |
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