An Experiment on Decision Making under Risk and Uncertainty

Abstract

We asked the participants of our controlled experiment to solve the Newsboy Problem. In this work we describe the design of the experiment. We analyze results of the experiment and emphasize the difference between the theoretical solution and the solution chosen by our subjects. We test several hypotheses including the hypothesis of learning. We also suggest a possible algorithm that could have been used by the participants. Using the assumptions of the probabilistic algorithm we compute the stationary distribution of the solutions. Executive summary is available on p.39 (in English).