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Durham University

Research & business

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Publication details for Prof Jason Shachat

Pan,J., Shachat,J. & Wei,S. (2020). Cognitive reflection and economic order quantity inventory management: An experimental investigation. Managerial and Decision Economics

Author(s) from Durham

Abstract

We use laboratory experiments to evaluate the effects of individuals' cognitive abilities on their behavior in a finite horizon economic order quantity model. Participants' abilities to balance intuitive judgment with cognitive deliberations are measured by the cognitive reflection test (CRT). Participants then complete a sequence of ordering decisions. Our results show that participants with higher CRT scores on average earn greater profit and choose more effective policies. However, these gaps are transitory as participants with lower CRT scores exhibit faster learning. We also show gender differences in performance do not hold when we control for individual CRT scores.