2016 INFORMS Annual Meeting Program

WC45

INFORMS Nashville – 2016

WC46 209B-MCC Demand Learning with Strategic Customers Sponsored: Revenue Management & Pricing Sponsored Session Chair: Xi Chen, New York University, Stern, New York, NY, United States, xchen3@stern.nyu.edu Co-Chair: Zizhuo Wang, University of Minnesota, Minneapolis, MN, United States, zwang@umn.edu 1 - Nonparametric Algorithms For Joint Pricing And Inventory Control With Lost-sales And Censored Demand Beryl Boxiao Chen, University of Illinois at Chicago, Chicago, IL, United States, boxchen@umich.edu, Xiuli Chao, Cong Shi We consider the classical joint pricing and inventory control problem with lost- sales and censored demand in which the customer’s response to selling price and the demand distribution are not known a priori, and the only available information for decision-making is the past sales data. A major difficulty lies in the fact that the estimated profit function from observed sales data is multimodal even when the expected profit function is concave. We develop a nonparametric data-driven algorithm and show that the algorithm converges to the optimal policy as the planning horizon increases, and obtain the convergence rate of regret. 2 - Bayesian Dynamic Learning And Pricing With Strategic Customers Xi Chen, New York University, xchen3@stern.nyu.edu, Zizhuo Wang In this talk, we study a pricing problem when the customer is aware of the seller’s policy, and thus may behave strategically when making a purchase decision. We first show that a naive myopic Bayesian policy (MBP) by the seller may lead to incomplete learning —- the seller may never be able to ascertain the true type of the customer and the regret may grow linearly in time. To resolve this issue, we propose a randomized Bayesian policy (RBP), which updates the posterior belief of the customer in each period with a certain probability. We show that the seller can learn the customer type exponentially fast with the RBP even if the customer is strategic, and the regret is bounded by a constant. 3 - Operational Implications Of Choice Paralysis Srikanth Jagabathula, New York University, sjagabat@stern.nyu.edu, Rene A Caldentey, Anisha Patel We consider the operational implications of the “choice paralysis” effect, which states that customers are less likely to choose as the number of choices becomes large. The choice paralysis effect has been established in various lab studies, but so far has received little attention in the operations community. To address that, we first carry out an empirical study with supermarket data and observe that, at the aggregate-level, the choice paralysis effect varies across different product categories. Based on this evidence, we propose a modification to the multinomial logit (MNL) model to capture the choice paralysis effect. In the context of the model, we discuss the operational implications. WC47 209C-MCC Unique Applications in Pricing and Revenue Management Sponsored: Revenue Management & Pricing Sponsored Session Chair: Jon A Higbie, Revenue Analytics Inc, Atlanta, GA, United States, jhigbie@revenueanalytics.com 1 - Emerging Topics In Revenue Management For The Cruise Industry Gregory Vogel, Holland America Line, gvogel@hollandamerica.com Much research has been done in traditional travel and hospitality industries such as Airlines, Hotels, Resorts, Casinos etc. Very little has been done in regards to the specific problem that are cruise lines. In this talk we discuss similarities and differences between traditional OR research into these industries and the cruise industry and then delve into the problems that the industry is most interested in solving along with an overview of problems that are currently being investigated.

2 - When Suppliers Climb Value Chain: A Theory Of Value Distribution In Vertical Relationships Zhixi Wan, University of Oregon, Eugene, OR, United States, zwan@uoregon.edu, Brian Wu Offshore outsourcing gives rise to the phenomenon of value chain climbing - suppliers in emerging markets can develop capabilities by supplying, with aspirations to compete with the buyers in the product market. We build an analytical model to study the impact of value chain climbing on value distribution in vertical relationships. The analysis identifies a set of dominant relationships, characterizes how the buyer’s optimal choice among these relationships depends on firms’ relative competitiveness in the product market and the supplier’s speed of capability development, and shows how the optimal choice evolves with the dynamics of the supplier’s capability development. 3 - Strategic Investment In Common Assets Under Uncertainty Dharma Kwon, Associate Professor, University of Illinois at Urbana-Champaign, Champaign, IL, United States, dhkwon@illinois.edu, Youngsoo Kim, George Georgiadis We investigate the game of investment in common assets under uncertainty as a two-player stochastic war of attrition in continuous time. We characterize the equilibrium when there are indefinitely many opportunities of investment. We focus on the impact of stochasticity and the asymmetry between the two players. 4 - Playing A Dominated Strategy In A Simple Bankruptcy Case: Field And Experimental Data WC45 209A-MCC Network Economics I Sponsored: Simulation Sponsored Session Chair: Bruno Tuffin, INRIA, Rennes Cedex, France, bruno.tuffin@inria.fr Co-Chair: Patrick Maillé, Telecom Bretagne, 2, rue de la Cha^taigneraie, Cesson Sévigné, 35576, France, patrick.maille@telecom-bretagne.eu 1 - Auctions For Online Ad Space Among Advertisers Mixing Pay-per-view And Pay-per-click Bruno Tuffin, INRIA, bruno.tuffin@inria.fr, Patrick Maillé Advertisement in dedicated webpage spaces or in search engines sponsored slots is usually sold using auctions, with a payment rule that is either per view or per click. But advertisers can be both sensitive to being viewed and being clicked. We generalize the auction mechanism by including both pricing components. Applying VCG auctions, we show how to compute payments to ensure incentive compatibility from advertisers as well as maximize the total value of the advertisement slot(s). We provide bounds for the loss of efficiency due to applying only pay-per-click (or pay-per-view) pricing instead of our scheme. We also describe how the generalized second price auction can be extended to this context. 2 - Investment And Competition With Shared Spectrum Randall Berry, Northwestern University, rberry@eecs.northwestern.edu Meeting the exploding demand for wireless data services will require access to new wireless spectrum. This in turn has led to much interest in approaches for sharing spectrum among different users. These approaches raise not only technical challenges but also can fundamentally change the economic interactions among wireless service providers. We consider such effects by adapting models for price competition with congestible resources. We also study how such sharing can impact a service provider’s incentives to invest in shared spectrum bands. 3 - Data Bundling And Pricing In The Internet Of Things Maurizio Naldi, University of Rome Tor Vergata, Roma, Italy, naldi@disp.uniroma2.it, Luis Guijarro, Vicent Pla, José Ramon Vidal The upcoming Internet of things will generate a massive amount of data. Much of them will be distributed and traded in a marketplace. Brokering third-parties may ease the relationship between data producers and data consumers. Brokers take care of bundling data coming from different sources and delivering them to consumers within a single commercial offer. In this context, pricing data is an extremely important decision, impacting both the broker’s role feasibility and the success of the distributing scheme. Optimal pricing strategies are derived and discussed, considering their impact on all the stakeholders. Steven A Lippman, Univ of California-Los Angeles, slippman@anderson.ucla.edu, Sushil Bikhchandani We consider a real life bankruptcy case in which the judge asked unsecured creditors the least they would accept in full satisfaction of their claims. Even when real money is at stake, creditors play dominated strategies. An even greater percentage of MBAs play dominated strategies.

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