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Open AccessArticle

A Systematic Analysis and Experimental Verification of Joint Pricing and Inventory Strategies in Competitive Newsvendor Environments

by Mengmeng Shi, Yue Liu and Shaohui Wu

Systems 2025, 13(1), 18; https://doi.org/10.3390/systems13010018 - 31 Dec 2024

Viewed by 931

Abstract

This study examined joint pricing and inventory decisions in a competitive newsvendor environment using a combination of theoretical modeling and experimental methods. We developed a newsvendor model with price competition and inventory decisions. Participants in a laboratory experiment made simultaneous pricing and inventory decisions over 50 rounds, with their opponents’ identities unknown. We theoretically proved the existence of a mixed Nash equilibrium, i.e., different equilibrium prices corresponded to different optimal inventory quantities. The experimental results show that about

50 %

of the joint pricing and inventory decisions were consistent with the predictions of the equilibrium model. However, systematic deviations from the equilibrium predictions were also observed at the aggregate level. We developed a novel context-dependent quantal response equilibrium model (QRE) for the bivariate newsvendor game setting. The context-dependent quantal response equilibrium model fit the observed decision biases remarkably well, and it was significantly better than the basic QRE model. This research provides insights into decision biases in complex systems and practical guidance for project planning and management. Full article

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30 pages, 716 KB

Open AccessArticle

Equilibrium Selection in Hawk–Dove Games

by Mario Blázquez de Paz and Nikita Koptyug

Games 2024, 15(1), 2; https://doi.org/10.3390/g15010002 - 31 Dec 2023

Cited by 1 | Viewed by 2640

Abstract

We apply three equilibrium selection techniques to study which equilibrium is selected in a hawk–dove game with a multiplicity of equilibria. By using a uniform-price auction as an illustrative example, we find that when the demand in the auction is low or intermediate, the tracing procedure method of Harsanyi and Selten (1988) and the quantal response method of McKelvey and Palfrey (1998) select the same equilibrium. When the demand is high, the tracing procedure method does not select any equilibrium, but the quantal response method still selects the same equilibrium as when the demand is low or intermediate. The robustness to strategic uncertainty method of Andersson, Argenton and Weibull (2014) selects two of the multiple equilibria irrespective of the demand size. We also analyze the impact of an increase in the minimum bid allowed by the auctioneer in the equilibrium selection. Full article

(This article belongs to the Special Issue Applications of Game Theory to Industrial Organization)

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25 pages, 995 KB

Open AccessArticle

Dynamics of the US Housing Market: A Quantal Response Statistical Equilibrium Approach

by Özlem Ömer

Entropy 2018, 20(11), 831; https://doi.org/10.3390/e20110831 - 30 Oct 2018

Cited by 9 | Viewed by 3125

Abstract

In this article, we demonstrate that a quantal response statistical equilibrium approach to the US housing market with the help of the maximum entropy method of modeling is a powerful way of revealing different characteristics of the housing market behavior before, during and after the recent housing market crash in the US. In this line, a maximum entropy approach to quantal response statistical equilibrium model (QRSE) is employed in order to model housing market dynamics in different phases of the most recent housing market cycle using the S&P Case Shiller housing price index for 20 largest- Metropolitan Regions, and Freddie Mac housing price index (FMHPI) for 367 Metropolitan Cities for the US between 2000 and 2015. Estimated model parameters provide an alternative way to understand and explain the behaviors of economic agents, and market dynamics by questioning the traditional economic theory, which takes assumption for the behavior of rational utility maximizing representative agent with self-fulfilled expectations as given. Full article

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15 pages, 509 KB

Open AccessArticle

Quantal Response Statistical Equilibrium in Economic Interactions: Theory and Estimation

by Ellis Scharfenaker and Duncan K. Foley

Entropy 2017, 19(9), 444; https://doi.org/10.3390/e19090444 - 25 Aug 2017

Cited by 33 | Viewed by 8387

Abstract

Social science addresses systems in which the individual actions of participants interacting in complex, non-additive ways through institutional structures determine social outcomes. In many cases, the institutions incorporate enough negative feedback to stabilize the resulting outcome as an equilibrium. We study a particular type of such equilibria, quantal response statistical equilibrium (QRSE) using the tools of constrained maximum entropy modeling developed by E. T. Jaynes. We use Adam Smith’s theory of profit rate maximization through competition of freely mobile capitals as an example. Even in many cases where key model variables are unobserved, it is possible to infer the parameters characterizing the equilibrium through Bayesian methods. We apply this method to the Smithian theory of competition using data where firms’ profit rates are observed but the entry and exit decisions that determine the distribution of profit rates is unobserved, and confirm Smith’s prediction of the emergence of an average rate of profit, along with a characterization of equilibrium statistical fluctuations of individual rates of profit. Full article

(This article belongs to the Special Issue Entropic Applications in Economics and Finance)

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