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Dertwinkel-Kalt, Markus and Koester, Mats (2017). Salient compromises in the newsvendor game. J. Econ. Behav. Organ., 141. S. 301 - 316. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 1879-1751

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Abstract

The newsvendor problem denotes the puzzle that a retailer facing an uncertain demand for some product underreacts to profit margins, and hence adjusts the order quantity toward the expected demand. Due to its range of applications in operations management, this problem has drawn much interest in recent years. Various articles have tried to reconcile the newsvendor problem with loss aversion under ad hoc assumptions on the underlying reference point. We, instead, argue that the newsvendor problem is an application of the well-studied compromise effect. As the compromise effect is based on violations of the IIA axiom, we argue that models of context-dependent behavior, such as salience theory, better explain newsvendor-like behavior than loss aversion-based models. We conduct a novel experiment which allows us to clearly distinguish between the role of loss aversion and salience, and find strong support for the latter. Thereby, we also add to the agenda of comparing loss aversion-based models and salience theory. (C) 2017 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Dertwinkel-Kalt, Markus UNSPECIFIED UNSPECIFIED UNSPECIFIED Koester, Mats UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-218677
DOI:	10.1016/j.jebo.2017.07.008
Journal or Publication Title:	J. Econ. Behav. Organ.
Volume:	141
Page Range:	S. 301 - 316
Date:	2017
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	1879-1751
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language REFERENCE-DEPENDENT PREFERENCES; YORK-CITY CABDRIVERS; PROSPECT-THEORY; CONSUMER CHOICE; RISK; AVERSE; BIAS; SATISFACTION; EXPECTATIONS; COMPETITION Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/21867