This paper is first to explore behavioural aspects of newsvendor competition. We present a laboratory experiment that documents the behavioural ordering regularities in competitive newsvendor environments, as well as an analytical model that extends the standard theory of newsvendor competition by deriving the optimal (best reply) policy for competing with a behavioural newsvendor.

We test the effectiveness of this policy using an out-of sample experiment and find that it results in significant improvements in market share, service level and profitability. Our work offers practical guidance for how one can exploit behaviourally-biased ordering policies of competition.