Journal
M&SOM-MANUFACTURING & SERVICE OPERATIONS MANAGEMENT
Volume 10, Issue 4, Pages 625-636Publisher
INFORMS
DOI: 10.1287/msom.1080.0229
Keywords
behavioral operations; revenue management; dynamic pricing; decision bias; heuristics
Funding
- AFOSR-MURI [F49620-03-1-0377]
- Department of Management and Organizations at the University of Arizona
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We study a problem of selling a fixed number of goods over a finite and known horizon. After presenting a procedure for computing optimal decision policies and some numerical results of a simple heuristic policy for the problem, we describe results from three experiments involving financially motivated subjects. The experiments reveal that decision makers employ decision policies of the same form of the optimal policy. However, they show systematic biases to demand too much when they have many units to sell and too little when they have few to sell, resulting in significant revenue losses.
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