How Precious Are Scarce Products? An Experimental Study on a Turn‐and‐Earn Allocation Mechanism

In this study, we conduct laboratory experiments to analyze a turn‐and‐earn allocation mechanism by which a single supplier allocates scarce products to two identical retailers. Under this mechanism, the supplier uses past sales to dynamically allocate scarce capacity among downstream retailers. The experimental data show that retailers strategically and systematically order more than predicted by standard theory. We find that the psychological...