2016 INFORMS Annual Meeting Program

WE76

INFORMS Nashville – 2016

WE74 Legends B- Omni Ops/Economics Inter Contributed Session Chair: Huaqing Wang, Assistant Professor, Emporia State University, 1 Kellogg Circle, Emporia, KS, 66801, United States, hwang4@emporia.edu 1 - Optimal Bundling Of Information Goods In A Duopoly Araz Khodabakhshian, UCLA Anderson School of Management, 501 Gayley Avenue, Apt 11, Los Angeles, CA, 90024, United States, araz.khodabakhshian.1@anderson.ucla.edu, Uday S Karmarkar, Guillaume Roels Bundling is a common practice in several business sectors, but there are also many examples of firms that choose not to bundle. We study bundling in the presence of competition to examine its implications for bundling strategy. We model the bundling strategy of two firms offering two products to two customers as a two-stage non-cooperative game. In the first stage, firms choose their product offering combinations. In the second, they simultaneously choose prices for their offerings. We consider two extreme cases of perfectly positively and perfectly negatively correlated customer valuations. We show that in equilibrium, only one of two competing firms chooses to bundle. 2 - Launching Next Generation Products In A Competitive Market Xishu Li, Erasmus University, Mandeville (T) Building, Room 9-56, Erasmus University, Rotterdam, 3062PA, Netherlands, x.li@rsm.nl, Rob A Zuidwijk, M.B.M. (Rene) de Koster We consider a next-generation product launch problem in a competitive market under uncertain product quality and consumer taste. We focus on two levels of competition: 1) next-generation product competes with the existing product for capacity and demand; 2) firm competes with its competitor for product quality, market share and price. 3 - Retailer Strategic Pricing Under Sticky Demand Zheng Li, Student, Texas A&M University, 263 Navarro Dr, College Station, TX, 77845, United States, lzrain@tamu.edu, Haoying Sun, Xirong Chen, Haipeng Chen The literature on dynamic pricing assumes that consumer demand responds to any changes in price. Recent advances in economics, however, have suggested that consumers may be rationally inattentive and not respond to small price changes, resulting in demand stickiness. We explicitly model the implications of this sticky demand on firm’s pricing behaviors. Using a large dataset consisting of eight years of weekly grocery retail data, we estimate the magnitude of demand stickiness and demonstrate how the estimates vary with consumer demographics. Furthermore, we conduct a counterfactual analysis showing the profit improvement a retailer could enjoy by taking into account this demand stickiness. 4 - Association Between Relatedness In Diversification And Performance Of Us Public Firms Muhammad Zubair, Nanyang Business School, 50 Nanyang Avenue, Blk S3-01B-73, Singapore, 639798, Singapore, c130016@e.ntu.edu.sg, Chen Chien-Ming This study empirically examines the link between relatedness in the diversification of a firm and its inventory performance. The study is based on firms’ annual financial and segment sales data in addition to US industry input- output data. 5 - Product Quality Differentiation Through Information Provision Huaqing Wang, Assistant Professor, Emporia State University, 1 Kellogg Circle, Emporia, KS, 66801, United States, hwang4@emporia.edu, Haresh B Gurnani, Raphael Boleslavsky We examine the joint interaction of information provision and pricing decisions by two competitive firms when a buyer is uncertain about product valuations. Firms generate product differentiation by allowing consumers to learn about valuations or prevent them from doing so. We characterize equilibrium prices and its interaction with information policies.

We investigate the impact of industry market concentration on the ability of firms with adventurous and rational managers to deal with extreme cash flows. We provide simulation results on how market concentration (from a monopoly to a perfectly competitive structure), influence the NPV decisions of firms with different manager/cash flow types. While prices to consumers are higher under a monopoly, they may provide additional benefits to society in the form of having extended ability to survive extreme cash flows. 2 - Organizational Design: Scale, Scope, Focus And Decentralization Phillip J Lederer, Professor, University of Rochester, Box 270100, Rochester, NY, 14627, United States, Lederer@simon.rochester.edu Scale, scope, focus and decentralization affect the design of management hierarchy that monitors and controls production. Modeled as a network of information processors, an optimal design minimizes capacity and time delay costs. Among the results are: sufficient conditions that induce “product” and “process focus are derived. Large changes in cost don’t much change the hierarchy’s departmental structure but greatly affect capacity allocation. Local decision making has a much larger effect on hierarchy’s height than large delay cost. Staff utilization falls with level. 3 - Volatility Spillover Dynamics In Chinese Steel Markets Wen Fang, Xidian University, Xi’An, China, az-moju@163.com The development of steel market plays an important role in the development of China’s bulk stock commodity market. China has emerged a typical steel market —— steel electronic market, which is in the process of vigorous development. Three types of steel market coexisting is a realistic background and trend in Chinese steel industry. Our research focuses on volatility spillover in Chinese steel markets. The objective of our research is to reveal which steel market is a strong barometer for the steel price fluctuations. A dynamic multi-dimensional volatility spillover method based on GARCH model and Kalman filter is proposed aiming at the volatility dynamics research in Chinese steel markets. 4 - Optimal Design Of Discrete Dutch Auction With Time Limitation Jinfeng Yue, Middle Tennessee State University, Department of Managment and Marketing, Murfreesboro, TN, 37132, United States, jinfeng.yue@mtsu.edu, Jinfeng Yue, Shanghai University of Finance and Economics, Shanghai, China, jinfeng.yue@mtsu.edu, Zhen Li This research concerns the optimal design of discrete Dutch auction. It explains why Dutch auction is a fast auction; a secret reserve price alone cannot improve the auction outcome, but its influence can be achieved through the existence of strategic shoppers and the magnitude of their salvage values; the knowledge about bidding population size yields a higher expected revenue per unit of time. 5 - The Effects Of Financial And Operational Hedging On Operational Variables: Evidence From The Gold Mining Industry Panayotis Markou, IE Business School, Calle Maria de Molina 12, Bajo, Madrid, 28006, Spain, pmarkou.phd2016@Student.ie.edu, Daniel S Corsten Prior analytical models of hedging are sometimes contradictory, and the exact mechanism by which hedging affects operations is not well understood. We use a detailed data set comprising the financial and operational hedging decisions of 82 gold miners from 2003 to 2011 to analyze the effects of risk management on inventory and profit variance. Gold miners can utilize operational hedging, yet this strategy increases inventory and profit variance. Financial hedging is also used to mitigate price risk, and this reduces inventory and profit variance. When used simultaneously, the financial hedge controls the operational hedge, resulting in significant reductions in inventory and profit variance. Decision Analysis Contributed Session Chair: Tao Du, Beijing Insititute and Technology, Beijing, China, dutao0608@163.com 1 - The Impact Of Capability Portfolio on Competitive Position Between Industry Duopoly Yanyun Zhang, Guanghua School of Management, Peking University, Beijing, China, yanyunzhang2010@163.com We attempt to study the impact of a firm’s capability portfolio on performance between industry duopoly with Stackelberg model. The weaker position firm owns its specific advantages, regarding as its capability as well as for the stronger one. Meanwhile, the capability’s contribution weight differs. A firm faces a risk of failure when the performance is lower than a certain threshold. Respectively from static and dynamic perspectives, we know how to balance capabilities to overcome the competitors, or to remain competitive and whether to strengthen or weaken the capability to improve the competitive position where firm’s performance varies with the boundary changes of the firm’s capability. WE76 Legends D- Omni

WE75 Legends C- Omni Ops/Finance & Economics Contributed Session

Chair: Panayotis Markou, IE Business School, Calle Maria de Molina 12, Bajo, Madrid, 28006, Spain, pmarkou.phd2016@student.ie.edu 1 - How To Handle Extreme Supply Chain Situation Wenqing Zhang, University of Minnesota Duluth, 1318 Kirby Drive, Labovitz School of Business and Economics, Duluth, MN, 55812, United States, zhangwenqing@gmail.com, Prasad Padmanabhan, Chia-Hsing Huang

507