Comprehension Questions (1/2)


  Please answer the following questions. You are required to answer all questions correctly in order to proceed to the actual experiment. Hints will be provided when your answer is incorrect. You can find the instruction of the experiment at the bottom of the page.

 





Description of the Game


You are the inventory manager of a company that sells products through two retail store channels, retail store A and retail store B. Each retail store serves its own local market, and customer demands across the two stores are independent.

Customer demand at each retail store is fixed and known when you make your allocation decisions.

Your task is to allocate a fixed inventory of a product to the two retail stores before the selling period begins. When the selling period starts, each retail store serves customer demand using the inventory allocated to that store.

In each period, you have a total of 100 inventory units available. This means that the total number of units allocated across the two retail stores cannot exceed 100 units. For example, if you allocate 60 units to retail store A, you can allocate at most 40 units to retail store B.

Figure 1: Inventory Allocation
Figure 1: Inventory Allocation


Your Revenue


There will be 10 selling periods. In each period, you will make one inventory allocation decision. Your objective is to maximize your total revenue over all selling periods.

Total revenue (tokens) = revenue from Retail Store A + revenue from Retail Store B


The revenue from each retail store depends on:

  • The amount of inventory allocated to that store
  • The realized customer demand at that store

Revenue from a store (tokens) = wholesale price × Min[allocated inventory, realized demand]


If realized demand exceeds allocated inventory:

  • The store sells all units allocated to it
  • Some customer demand remains unmet
  • Revenue from the store equals the wholesale price multiplied by allocated inventory

If realized demand is lower than allocated inventory:

  • The store sells units equal to realized demand
  • Some allocated units remain unsold
  • Revenue from the store equals the wholesale price multiplied by realized demand
  • Unsold units have no value and are discarded at no additional cost


Inventory Allocation Task

  • In each period, you allocate a fixed total inventory of 100 units between two retail stores.
  • The sum of inventory allocated to Retail Store A and B must equal the total inventory.
  • You may use the decision support tool to explore the revenue implications of different allocations.
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