Open AccessPull-to-center is not just for newsvendors
Author(s) -
Zuzana Brokešová,
Cary Deck,
Jana Péliová
Publication year - 2022
Publication title -
plos one
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.99
H-Index - 332
ISSN - 1932-6203
DOI - 10.1371/journal.pone.0264183
Subject(s) - newsvendor model , replicate , context (archaeology) , game theory , mathematical economics , economics , computer science , econometrics , microeconomics , supply chain , biology , statistics , mathematics , marketing , paleontology , business
The pull-to-center effect is a systematically observed suboptimal behavior in newsvendor experiments. Various explanations have been forward for this phenomenon, some of which are based on structural properties of the task while others are based upon the inventory context of the problem. To help distinguish between these two types of explanations, we compare behavior in a newsvendor game to behavior in a new, mathematically isomorphic, price gouging game. Our laboratory experiments replicate the standard results for newsvendors and yield the equivalent pattern in the price gouging game. This suggests previously observed newsvendor behavior is driven by structural aspects of the task consistent with models like prospect theory and impulse balance rather than context specific explanations pertaining to inventory management.