Abstract
In order to study retailers’ ordering behavior deviating from the standard theoretical optimal decision, which is caused by retailers’ information asymmetry, cognitive ability, insufficient computing ability, and other factors, we construct a bounded-rationality choice model with quantal response equilibrium. First, the existence and uniqueness of quantal response equilibrium of transshipment game have been proved with the transshipment price satisfying certain conditions. Then, the numerical example demonstrates that with the increase of bounded-rationality parameters, retailers’ quantal response equilibrium will converge to Nash equilibrium due to the learning effect, and their profits will converge to the profits predicted by standard theory. Finally, the results show that retailers are more averse to the explicit loss of shortage than to the implicit loss of inventory surplus caused by the increase of order quantity. Hence, retailers tend to overorder to avoid loss of shortage.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.