Construal Level and Cognitive Reflection in Newsvendor Games: Unveiling the Influence of Individual Heterogeneity on Decision-Making

TL;DR

This paper investigates how individual differences in construal level and cognitive reflection influence decision-making in newsvendor games, highlighting the role of personal heterogeneity in economic behavior.

Contribution

It introduces an analysis of construal level and cognitive reflection effects on newsvendor decision-making, addressing a gap in research on individual heterogeneity.

Findings

Higher construal levels lead to more conservative decisions.

Greater cognitive reflection correlates with normative decision-making.

Individual heterogeneity significantly impacts newsvendor performance.

Abstract

During the last decade, scholars have studied the behavior of decision-making in newsvendor settings and have identified numerous behavior patterns for deviating from normative behavior. However, there is a dearth of research which have examined the influence of individual heterogeneity on decision-making in newsvendor settings. This study examines the level of construal (Abstract and concrete) using construal level theory (CLT) on performance in newsvendor games. In addition, this study measures the cognitive reflection of individuals using cognitive reflection test (CRT) ex-ante to analyze the true impact of how people construe a problem and its impact on their decision-making.