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Anchor Selection and Group Dynamics in Newsvendor Decisions—A Note

Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853
Robinson College of Business, Georgia State University, Atlanta, Georgia 30303
nagesh{at}cornell.edu
ysxia{at}gsu.edu

We conducted a newsvendor experiment in which (i) the subjects were presented with multiple pieces of information that they could possibly use to anchor their decision and (ii) the subjects participated either as individuals or in groups of three. The primary objective was to determine whether the subjects tended to consistently anchor to the mean or change their anchor based on the experimental setting. The secondary objective was to study the impact of group dynamics on their decision-making approach. We observed that the subjects did not anchor to any one particular value, but rather chose an anchor that was closer to the optimal value. In addition, we observed that although there was no difference in their relative tendencies to anchor, the subjects in groups demonstrated a lower propensity for error than their individual counterparts.

Key Words: newsvendor models; anchoring; group decisions
History: Received on June 22, 2008. Accepted on January 12, 2009.

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