2016 INFORMS Annual Meeting Program

TC30

INFORMS Nashville – 2016

TC30 202B-MCC

to their creditors more efficiently. As a result, in-kind financing mitigates signaling costs, rationalizing among others, why firms may prefer to finance their operations through their suppliers. Our model suggests this preference can persist even when in-kind lenders have no prior informational advantage and face comparatively higher cost of capital, and is more pronounced when the borrowed goods have higher margins or differentiation, or require less production effort. 2 - Innovative Financing For Sme Suppliers: Factoring, Reverse Factoring And Retailer’s Engagement Fasheng Xu, Washington University in St. Louis, St. Louis, MO, fasheng.xu@wustl.edu, Panos Kouvelis We consider a pull supply chain with a large retailer and an SME supplier, who is in need of short-term pre-shipment financing. The bank offers a fairly priced loan and repayment failure leads to costly bankruptcy. Benefits of recourse factoring are limited, but non-recourse factoring achieves surprisingly better performance by eliminating market frictions. Further, we investigate two financing schemes in reverse factoring: the partial credit guarantee (PCG) and the purchase order commitment (POC). We find PCG can slightly reduce supplier’s financing cost, meanwhile POC can lead to a win-win solution for the decentralized supply chain, with even higher expected profit than the centralized one. 3 - R&D Investments In The Presence Of Free-riding And Risk-shifting Incentives: Can Debt Financing Mitigate Under- investment? When information is a public good, in equilibrium firms under-invest (relative to the social optimum) in acquiring it to free-ride on investments of other firms. When firms are financed by debt, in equilibrium equity holders invest in riskier projects relative to the firm-optimal. The interactions between these two inefficiencies arise when risky investments are needed to acquire information that becomes a public good, as in some R&D projects. We model these interactions in a three-stage game with two firms and an external debt market. We show that the presence of free-riding and risk-shifting incentives may lead to either under- investment, over-investment, or socially optimal investment. TC32 203A-MCC Revenue Mgt, Pricing II Contributed Session Chair: Sareh Nabi Abdolyousefi, University of Washington, 2727 NE 55th Street, Seattle, WA, 98105, United States, snabi@uw.edu 1 - A Pricing Setting Retailer Sourcing From Competing Suppliers Facing Disruption We study the case of a price-setting retailer who sources from two strategic suppliers subject to independent or correlated disruption and sets the retail price upon delivery. We model this case as a Stackelberg-Nash game with the suppliers as the leaders and the retailer as a follower, and obtain explicitly the equilibrium of the game. We identify cases in which the retailer orders from one perfectly reliable supplier and one unreliable supplier, and two correlated unreliable suppliers. In the latter case, the equilibrium suppliers’ profits can increase in supplier disruptions correlation, which is not consistent with the literature. 2 - Pricing Of Internet Dynamically Under Changing Capacity Demet Batur, Assistant Professor, University of Nebraska - Lincoln, CBA 209, Lincoln, NE, 68588-0491, United States, dbatur@unl.edu, Jennifer Ryan, Zhongyuan Zhao, Mehmet C Vuran Technological advancements created the TV white space (TVWS)—the opportunity to use parts of the TV spectrum for Internet when and where the TV channels are not actively used by broadcasting companies. The Internet capacity generated from the emerging TVWS systems will change stochastically. Also, the capacity needed by the customers for various Internet activities differ significantly, e.g., email checking versus video streaming. We present a Markov Decision Process model for the service provider to post dynamically changing prices to the customers based on the current available capacity and the expected customer usage with a revenue maximization objective. Xi Shan, Student, The University of Texas at Dallas, 800 W. Campbell Road, Richardson, TX, 75080, United States, 130630@utdallas.edu, Suresh P Sethi”, Tao Li Jie Ning, Case Western Reserve University, Cleveland, OH, United States, jie.ning@case.edu, Volodymyr O Babich

Supply Chain Channel Management Sponsored: Manufacturing & Service Oper Mgmt Sponsored Session Chair: Guoming Lai, University of Texas at Austin, United States, guoming.lai@mccombs.utexas.edu Co-Chair: Abhishek Roy, UT Austin, UT Austin, Austin, TX, 78712, United States, abhishek.roy@utexas.edu 1 - Financial Cross-ownership And Information Dissemination In A Supply Chain Noam Shamir, Tel-Aviv University, Coller School of Management, Tel-Aviv, Israel, nshamir@post.tau.ac.il, Yossi Aviv We study the effect of financial cross-ownership on two imperative operational decisions in a supply-chain with competing retailers and a mutual supplier: Information acquisition and production level. Financial cross-ownership describes a situation in which an incumbent retailer holds non-voting stocks in an entrant retailer. We demonstrate the significant operational effect of this investment tool. At the production stage, financial cross-ownership results in lower production level and reduced competition level. However, financial cross-ownership can result in pro-competitive effects; it facilitates information acquisition, that can benefit the consumers. 2 - Broader Market Coverage For Innovative Products With Deliberate Supply Chain Leadership Hyoduk Shin, UC San Diego Rady School of Management, hdshin@ucsd.edu, Vish Krishnan, Junghee Lee, Oleksiy Mnyshenko How can we achieve broader market coverage for innovative products, i.e., inclusive innovation? Grounded in industrial practice, we show that deliberately choosing the contract leader and the investor in a multi-tiered supply chain can have a significant impact on market coverage. We discuss leadership handovers along the product life cycle. 3 - Manufacturer Rebate Competition In A Supply Chain With A Common Retailer Yunjie Wang, Hong Kong University of Science and Technology, yunjie89@gmail.com, Albert Y Ha, Weixin Shang We consider manufacturer rebate competition in a supply chain with two manufacturers selling substitutable products to a common retailer. We characterize the manufacturers’ equilibrium rebate decisions and show how they depend on several key factors such as the fixed cost of a rebate program, competition intensity, cost effectiveness of rebate and the proportion of rebate- sensitive consumers in the market. We also consider the case when the retailer subsidizes the manufacturers to offer rebate. 4 - The Implications Of Visibility On The Use Of Strategic Inventory In A Supply Chain Abhishek Roy, University of Texas at Austin McCombs School of Business, abhishek.roy@utexas.edu, Stephen M Gilbert, Guoming Lai It is now widely accepted that a retailer’s use of strategic inventory benefits both the retailer and the manufacturer. However, it has typically been assumed that the manufacturer has perfect information about the retailer’s level of inventory, either by observing it directly, or by inference based on sales observations. Yet, in reality, there are many situations in which a manufacturer may lack the ability to observe either the sales or the inventory of the retailer. We investigate how this lack of inventory observability affects the use of strategic inventory in a supply chain, and how the possibility of strategic inventory shapes the information preferences of the retailer and the manufacturer. TC31 202C-MCC Operations/Corporate Finance Interface Sponsored: Manufacturing & Service Oper Mgmt, iFORM Sponsored Session Chair: Jie Ning, Case Western Reserve University, 10900 Euclid Ave, Cleveland, OH, 44106, United States, jie.ning@case.edu Co-Chair: Volodymyr O Babich, Georgetown University, 3700 O St NW, Washington, DC, 20057, United States, vob2@georgetown.edu 1 - Inventory And Signaling To Creditors Jiri Chod, Boston College, Chestnut Hill, MA, United States, chodj@bc.edu, Nikolaos Trichakis, Gerry Tsoukalas We argue that by borrowing goods (e.g., through supplier trade credit) rather than cash (e.g., through a bank), firms may be able to convey private information

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