We study the interaction between a seller and a buyer, both of whom face uncertainty related to downstream demand, over a two-period horizon. Making multi-unit purchase decisions before demand from their respective lower tier realizes, both agents seek to minimize their demand mismatch risk as perceived according to their degree of foresight. Focusing on the effect of buyer foresight, we find that with multi-unit purchases sellers benefit from some degree of buyer foresight but not too much.

Behavioral aspects of consumer return policy design and their interaction with other decisions in retailing have not been investigated to date. Leveraging a generalized newsvendor model, we conduct a randomized experiment to assess how subjects jointly make key decision (order quantity, price, and refund amount) and the effect of salvage value on them. We identify time-dependent behavioral regularities that we explain through a process theory, thus providing a new direction for future research.

Actual inventory can be lower than recorded system inventory due to shrinkage or loss. To handle inventory inaccuracy, managers can decide to clean inventory data before placing order quantities. Alternatively, they can deliberately decide to not clean, but to compensate for the inaccuracy in the order decision. The optimal decision depends on the cost of cleaning and the efficiency loss due to the compensation. We present a set of hypotheses on this trade-off and test these in lab experiments.