We consider a supply chain with a single supplier and two retailers. The retailers choose their orders strategically, and if their orders exceed the supplier's capacity, quantities are allocated proportionally to the orders. We experimentally study the capacity allocation game using subjects motivated by financial incentives. We find that the Nash equilibrium, which assumes that players are perfectly rational, substantially exaggerates retailers' tendency to strategically order more than they need. We propose a model of bounded rationality based on the quantal response equilibrium, in which players are not perfect optimizers and they face uncertainty in their opponents' actions. We structurally estimate model parameters using the maximumlikelihood method. Our results confirm that retailers exhibit bounded rationality, become more rational through repeated game play, but may not converge to perfect rationality as assumed by the Nash equilibrium. Finally, we consider several alternative behavioral theories and show that they do not explain our experimental data as well as our bounded rationality model. Abstract:We consider a supply chain with a single supplier and two retailers. The retailers choose their orders strategically and if their orders exceed the supplier's capacity, quantities are allocated proportionally to the orders. We experimentally study the capacity allocation game using subjects motivated by financial incentives. We find that the Nash Equilibrium, which assumes that players are perfectly rational, substantially exaggerates retailers' tendency to strategically order more than they need.We propose a model of bounded rationality based on the Quantal Response Equilibrium, in which players are not perfect optimizers and they face uncertainty in their opponents' actions. We structurally estimate model parameters using the maximum likelihood method. Our results confirm that retailers exhibit bounded rationality, become more rational through repeated game play, but may not converge to perfect rationality as assumed by the Nash equilibrium. Finally, we consider several alternative behavioral theories and show that they do not explain our experimental data as well as our bounded rationality model.

E xisting studies on capacity allocation games have demonstrated that the standard Nash theory exaggerates retailers' tendency of ordering more than they need in the situation of supply shortage. Adding to the results in the literature, our experimental study with consideration of demand uncertainty demonstrates that the standard Nash theory also exaggerates retailers' tendency of telling the truth in their ordering strategy. To account for these systematic biases, based on the quantal response equilibrium framework, we develop a behavioral model with different mental weights on the underage and overage costs to characterize a retailer's perception bias regarding a critical fractile. Based on the parameter estimates, we show that retailers perceive the critical fractile as being closer to 0.5 than it is, and the perceived critical fractile increases over time. Such empirical evidence of retailers' behavior in capacity allocation games can be valuable, for example, in the mechanism design of coordination and in improving supply chain performance.

We consider a supply chain with a single supplier and two retailers. The retailers choose their orders strategically, and if their orders exceed the supplier's capacity, quantities are allocated proportionally to the orders. We experimentally study the capacity allocation game using subjects motivated by financial incentives. We find that the Nash equilibrium, which assumes that players are perfectly rational, substantially exaggerates retailers' tendency to strategically order more than they need. We propose a model of bounded rationality based on the quantal response equilibrium, in which players are not perfect optimizers and they face uncertainty in their opponents' actions. We structurally estimate model parameters using the maximumlikelihood method. Our results confirm that retailers exhibit bounded rationality, become more rational through repeated game play, but may not converge to perfect rationality as assumed by the Nash equilibrium. Finally, we consider several alternative behavioral theories and show that they do not explain our experimental data as well as our bounded rationality model. Abstract:We consider a supply chain with a single supplier and two retailers. The retailers choose their orders strategically and if their orders exceed the supplier's capacity, quantities are allocated proportionally to the orders. We experimentally study the capacity allocation game using subjects motivated by financial incentives. We find that the Nash Equilibrium, which assumes that players are perfectly rational, substantially exaggerates retailers' tendency to strategically order more than they need.We propose a model of bounded rationality based on the Quantal Response Equilibrium, in which players are not perfect optimizers and they face uncertainty in their opponents' actions. We structurally estimate model parameters using the maximum likelihood method. Our results confirm that retailers exhibit bounded rationality, become more rational through repeated game play, but may not converge to perfect rationality as assumed by the Nash equilibrium. Finally, we consider several alternative behavioral theories and show that they do not explain our experimental data as well as our bounded rationality model.

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The polarity of heteroepitaxial ZnO films is controlled by interface engineering. The ZnO films are grown on Ga-polar GaN templates by plasma-assisted molecular beam epitaxy. By forming a ZnO/GaN heterointerface without any interfacial layer through Zn pre-exposure, Zn-polar ZnO films are grown. O-polar ZnO films are obtained by forming a Ga2O3 interfacial layer, with an inversion center, inbetween the ZnO and GaN through O-plasma pre-exposure. A polarity inverted ZnO heterostructure is fabricated, without the formation of inversion domain boundaries, by inserting a MgO layer with an inversion center between the lower and upper ZnO layers. Mosaic tilt and twist angles of Zn- and O-polar ZnO films are, respectively, 0.10° and 0.18° (tilt), and 0.25° and 0.32° (twist). Dislocation densities in Zn-polar ZnO films are lower than those in O-polar ZnO films from both high resolution x-ray diffraction and transmission electron microscopic evaluation. A higher Ga-doping efficiency in the O-polar ZnO films than in the Zn-polar ZnO films was determined by two-layer Hall-effect analyses and photoluminescence intensities of Ga-related donor bound exciton emission. Free exciton emissions are observed from both undoped Zn-and O-polar ZnO films with narrower linewidths of bound exciton emissions from the Zn-polar ZnO films. Relative redshifts of bound exciton emissions from the O-polar ZnO films compared with those from the Zn-polar ZnO films are consistently observed for the undoped and Ga-doped ZnO films.