A behavioural analysis of the newsvendor game: Anchoring and adjustment with and without demand information

Production systems are the combined result of technologies, organization, and individual behaviour. Theimpact of the human factor on the efficacy and efficiency of production systems is difficult to predict,since it often escapes the predictions of orthodox models of rationality. Recent behavioural studies inOperations Management highlight that the Human’s behaviour deviates from the optimal solution, evenin simplified operating conditions such as those represented by the famous Newsvendor problem.Building on the results of controlled human experiments, this study proposes a decision-making modelthat accounts for the heuristics of anchoring and adjustment. Two experimental conditions, differing inthe provision of demand information to decision makers, are used to generate data. The model estimatedshows that anchoring and adjustment behaviour differs in the two conditions.