When a strange man places the doll on the stairway, do not take it. It actually makes things worse for you afterwards. If you place it in your storage box, babies will appear above the box, making it difficult to check your items. Your only choice would be to hold it in your inventory, but it requires a slot that you may need.

This item has no use at all. When you get the doll, put it in the box by Henry's television.