Experimental Studies on Capacity Allocation Games

Abstract：

We consider a supply chain with a single supplier and two retailers satisfying market demands. The retailers place orders to the supplier, and if the total amount of their orders exceeds the supplier’s capacity, quantities are allocated proportionally to the orders. Experimental studies are conducted on the capacity allocation game using subjects motivated by financial incentives. With deterministic demands and stochastic demands, the ordering behaviors of the subjects are investigated. Models with bounded rationality are developed to explain experimental data for characterizing the retailers’ ordering behaviors.

On the other hand, it is not clear whether the strategy method and the direct-response method lead to different behaviors in economic experiments. Based on the setting of the capacity allocation game, a normative-behavioral experiment and a neuroimaging (fMRI) experiment are conducted with the two methods. The results show that no significant difference is observed in the ordering behaviors between the two methods.