Informs Annual Meeting 2017

SD03B

INFORMS Houston – 2017

2 - Weakly Interacting Particle Systems on Inhomogeneous Random Graphs Ruoyu Wu, Brown University, 182 George Street, Providence, RI, 02912, United States, ruoyu_wu@brown.edu, Shankar Bhamidi, Amarjit Budhiraja We consider weakly interacting diffusions on time varying random graphs. The system consists of a large number of nodes in which the state of each node is governed by a diffusion process that is influenced by the neighboring nodes. The collection of neighbors of a given node changes dynamically over time and is determined through a time evolving inhomogeneous random graph process. A law of large numbers and a propagation of chaos result is established for a multi- type population setting, in which the edge probability is allowed to decay to 0 as the size of the system grows. A central limit theorem is established for the single- type population case under stronger conditions on the edge probability function. 3 - Ranking on Inhomogeneous Directed Random Graphs Mariana Olvera-Cravioto, Visiting Associate Professor, University of California, Berkeley, 4125 Etcheverry Hall, Berkeley, CA, 94720, United States, molvera@berkeley.edu We present results for a broad family of inhomogeneous directed random graphs which includes as special cases directed versions of the Erdos-Renyi, Chung-Lu, and Norros-Reittu models, among others. We discuss how they can be used to model scale-free directed complex networks, e.g., the web graph, Twitter, ResearchGate, and establish their basic connectivity structure. We then show how recent results for Google’s PageRank algorithm extend to this new family of random graphs, and how this provides a more natural way to model the relationship between highly ranked nodes and their attributes. We also discuss new insights on the influence of in-degree/out-degree correlations on ranking results. 4 - Metastability of Queuing Networks with Mobile Servers Francois Baccelli, University of Texas, Austin, TX, United States, Baccelli@math,utexas.edu We study symmetric queuing networks with moving servers and FIFO service discipline. The mean-field limit dynamics demonstrates unexpected behavior which we attribute to the meta-stability phenomenon. Large enough finite symmetric networks on regular graphs are proved to be transient for arbitrarily small inflow rates. However, the limiting non-linear Markov process possesses at least two stationary solutions. The proof of transience is based on martingale techniques. SD03B Grand Ballroom B Emerging Topics in Pricing and Revenue Management Sponsored: Revenue Management & Pricing Sponsored Session Chair: Pnina Feldman, University of California-Berkeley, Berkeley, CA, 94720, United States, feldman@haas.berkeley.edu 1 - Social Learning and the Design of New Experience Goods Ella Segev, Ben-Gurion University of the Negev, Beer Sheva, 84105, Israel, ellasgv@bgu.ac.il, Pnina Feldman Consumers often consult the reviews of their peers before deciding whether to purchase a new experience good; however, their initial quality expectations are typically set by the product’s observable attributes. In this talk we discuss the implications of social learning for a monopolist firm’s choice of product design. 2 - Loyalty Program Liabilities and Point Values Nikolaos Trichakis, MIT, 100 Main Street, E62-576, Cambridge, MA, 02143, United States, ntrichakis@mit.edu, So Yeon Chun, Dan Andrei Iancu A loyalty program (LP) introduces a new currency, the points, through which customers transact with a firm. Such points constitute a promise for future service, and therefore count as liabilities on the firm’s balance sheet. Since the value of points is controlled by the firm, this introduces subtle channels through which decisions affect profitability. We study the problem of setting the monetary value of loyalty points in view of these liabilities. We show that the value of points can be thought of as inventory, and optimal policies set this value, and the associated liability, to reach “base-stock” targets. 3 - Dynamic Pricing under Debt: Spiraling Distortions and Efficiency Losses Dan Andrei Iancu, Stanford University, 655 Knight Way, Stanford, CA, 94107, United States, daniancu@stanford.edu, Omar Besbes, Nikolaos Trichakis Firms often finance their inventories through debt. The pricing of products is consequently driven by both inventory and debt servicing considerations. We show that limited liability under debt induces sellers to charge higher prices and to discount products at a lower pace. We find that these distortions result in

revenue losses that compound over time, leading to some form of performance spiral down. We quantify the extent to which these inefficiencies can be mitigated by practical debt contract terms that emerge as natural remedies from our analysis, and find debt amortization or financial covenants to be the most effective, followed by debt relief and early repayment options. 4 - The Revenue Impact of Dynamic Pricing Policies on Major League Baseball Ticket Sales We study the implementation of multiproduct dynamic pricing by a Major League Baseball franchise for single game tickets. We develop a customer choice model to help design dynamic pricing policies for the franchise. Our model encompasses relevant aspects of customer demand generation process, including ticket quantity and seat section choice. Furthermore, our demand model incorporates external factors that drive the overall sport ticket price sensitivity such as the home team’s on-field performance, as well as the correlation between customers’ arrival timing and product choice. Our counterfactual results show potential revenue improvement of up to 17.2% through dynamic pricing. SD03C Grand Ballroom C Aligning Operational and Marketing/Financial Incentives Sponsored: Manufacturing & Service Oper Mgmt Sponsored Session Chair: Panos Kouvelis, Washington University in St. Louis, Saint Louis, MO, 63130-4899, United States, kouvelis@wustl.edu Co-Chair: Duo Shi, Olin Business School, Washington University- St Louis, Olin Business School, St. Louis, MO, 63130, United States, dshi@wustl.edu 1 - Co-opetition in Service Clusters with Waiting-area Entertainment Tinglong Dai, Johns Hopkins University, 100 International Dr, Baltimore, MD, 21202, United States, dai@jhu.edu, Gongtao Lucy Chen, Srinagesh Gavirneni, Xuchuan Yuan Unoccupied waiting feels longer than it actually is. Service providers operationalize this psychological principle by offering entertainment options in waiting areas. In a service cluster with a shared waiting space, firms have an opportunity to cooperate in the investment for providing entertainment options. In this paper, we model co-opetition in a service cluster with shared entertainment options for waiting customers. We show that as much as co- opetition facilitates resource sharing in a service cluster, it also heightens price competition. Furthermore, as the intensity of price competition increases, service Joseph Xu, Carnegie Mellon University, Pittsburgh, PA, United States, jiaqixu@andrew.cmu.edu, Peter Fadet, Senthil Veeraraghavan Duo Shi, Olin Business School, Washington University-St Louis, K.H.401, Olin Business School, 1 Brookings Drive, St. Louis, MO, 63130, United States, dshi@wustl.edu, Panos Kouvelis We analytically study a value chain consisting of three segments: a manufacturer, a retailer, and a sales agent. Five distinct value-chain structures are considered: an integrated value chain, an integrated distribution channel (the manufacturer and the retailer) compensating the sales agent, non-integrated channels with the manufacturer compensating the sales agent, with the retailer compensating the sales agent, and with joint compensation. We compare the strategic implications across all these value-chain structures. 3 - The Effects of International Tax Policy on Firms Production Outsourcing Strategies Yixuan Liu, The University of Texas at Austin, yixuan.liu@utexas.edu, Guoming Lai, Wenqiang Xiao We study the effects of international tax policy on firms’ production outsourcing strategies. We find that the U.S. tax deferral system may result in subtle changes of a firm’s strategy with international tax disparity. Our analysis shows that besides the general concern of income shifting, tax considerations can further lead to operational distortions. We then discuss the implications of a frequently raised tax reform proposal that suggests prohibiting tax deferral but lowering the home country tax rate. We find that there can exist a win-win tax rate region from a specific firm’s and the stakeholders’ perspectives. providers may opt to charge higher service fees. 2 - Who Compensates the Sales Agent?

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