An Experimental Analysis of an Inventory Game with Uninformed Players

Abstract

Game theoretic models require strong informational assumptions that may not hold in operations applications. In such settings, how do uninformed players behave? We take a first step towards addressing this question by conducting a controlled human subject experiment. We focus on a simple inventory setting: players simultaneously choose whether to visit a store and may face a stockout if demand exceeds supply, but they know neither the store inventory nor the number of potential customers. We make two key observations. First, the behavior of uninformed players converges quickly to that of fully informed players. Second, when we directly elicit players' beliefs of product availability, these beliefs eventually coincide with true availabilities. These results suggest that players can form rational expectations that serve as a reasonable proxy for complete information and allow uninformed players to behave as if they were informed. This study supports the use of game theoretic models even when standard informational assumptions do not hold.

Keywords: complete information, rational expectations, game theory, inventory, behavioral operations management