Informs Annual Meeting 2017

SD38

INFORMS Houston – 2017

SD39

3 - Selling Off-Grid Light to Liquidity Constrained Consumers Bhavani Shanker Uppari, INSEAD, 1 Ayer Rajah Avenue, Singapore, 138676, Singapore, BhavaniShanker.Uppari@insead.edu, Ioana Popescu, Serguei Netessine A large proportion of the world’s population has no access to electricity and so relies on noxious kerosene for their lighting needs. As an alternative, there are business models relying on rechargeable light bulbs that are sold at a subsidized price (which renders them affordable) and require regular micropayments for recharges (which eases liquidity constraints). These bulbs provide a cheaper and healthier light source than kerosene, yet their adoption is lower than expected and some consumers continue to use kerosene. This paper explores the potential drivers of such preferences and proposes strategies to alter them. 352C Bilevel Optimization and Applications Sponsored: Multiple Criteria Decision Making Sponsored Session Chair: Kalyanmoy Deb, Michigan State University, East Lansing, MI, 48824, United States, kdeb@egr.msu.edu 1 - Comparison of Multiobjective Optimization Approaches for Spatially Targeting Agri-environmental Policy Bradley Barnhart, United States EPA, 200 SW. 35th Street, Corvallis, OR, 97333, United States, bradleybarnhart@gmail.com, Gerald Whittaker, Moriah Bostian, Zhichao Wu, Ankur Sinha, Kalyanmoy Deb Spatially targeting agri-environmental policy has been widely studied and requires optimization of multiple objectives from multiple stakeholders, including policy makers and policy followers. This study tests the Platypus package in Python for multiobjective optimization and compares the results of multiple algorithms available within the framework (e.g., NSGAII, NSGAIII, MOEA/D) for spatially targeting a fertilizer tax that aims to reduce nonpoint source pollution and increase water quality throughout a heterogeneous, mixed-use watershed. The resulting policy trade-offs are compared to the DEAP package in Python and the MATLAB implementation of BLEAQ. 2 - Optimal Management of Naturally Regenerating Uneven-aged Forests Pekka Malo, Aalto University School of Business, Runeberginkatu 22-24, Helsinki, 00100, Finland, pekka.malo@aalto.fi, Ankur Sinha, Janne Rämö, Olli Tahvonen, Markku Kallio A shift from even-aged forest management to uneven-aged management practices leads to a problem rather different from the existing straightforward practice that follows a rotation cycle of artificial re-generation, thinning of inferior trees and a clearcut. A lack of realistic models and methods suggesting how to manage uneven-aged stands in a way that is economically viable and ecologically sustainable creates difficulties in adopting this new management practice. To tackle this problem, we propose an algorithm that is able to handle a realistic uneven-aged stand management model that is otherwise computationally tedious and intractable. 3 - Hub Interdiction and Protection Problem: Models and Solution Approaches Ankur Sinha, PhD, IIM Ahmedabad, India, IIM Ahmedabad, India, Ahmedabad, India, asinha@iimahd.ernet.in Many of the important sectors in the economy such as transportation, communication and energy deploy a hub-and-spoke network. Hub-and-spoke networks are attractive because of its cost advantages, but is also prone to severe network disruption in the event of one or more hubs failing. We present different formulations and solution methods for the hub interdiction and protection problem. We model the interdiction problem as a bilevel mixed integer linear program and then utilize the problem properties to reduce the number of optimization levels to one. We also study the three level protection problem, where we utilize the ideas developed for interediction to solve the trilevel optimization task. SD38

352D Making Decisions Considering Uncertainty – Decision Trees and Simulation

Sponsored: Analytics Sponsored Session Chair: Brian H. Putt, Self Employed, Fremont, CA, 94536, United States, brianputt@theputts.com 1 - Optimal Pipeline Maintenance Policy with Sipmath in Native Excel Brian H.Putt, Self Employed, 4372 Nagle Way, Fremont, CA, 94536, United States, brianputt@theputts.com, Sam L.Savage The US has thousands of miles of pipelines that have been in the ground for many years. Pipeline failures near residential and commercial locations are costly and deserve a higher maintenance priority because of their potential cost. But the maintenance budget is constrained and we want to stay within the budget. Which pipes should we replace based on Likelihood of Failure (LoF), uncertain Cost of Failure (CoF) and uncertain cost to maintain? In the San Francisco Bay Area we also have the potential for earthquakes. Maintenance of the pipelines reduces the LoF when an earthquake occurs. We will show how all these uncertainties are modeled using SIPmath and Excel, and then optimized using Excel’s Solver. 2 - Selecting a Technology Application in Upstream using Sipmath Ahren Lacy, Chevron, 1400 Smith St, 38188, Houston, TX, 77002, United States, ahrenlacy@gmail.com Selecting technologies for selecting in upstream projects involves assessing, quantifying, and evaluating uncertainties in cashflows. The author will present an example of using SIPmath to quickly incorporate uncertainty into common cashflow worksheets. 352E Behavioral Considerations in Pricing and Revenue Management Models Sponsored: Revenue Management & Pricing Sponsored Session Chair: Javad Nasiry, Hong Kong University of Science and Technology- HKUST, Lee Shau Kee Business Building, Room 4079, Hong Kong, nasiry@ust.hk Co-Chair: Ningyuan Chen, HKUST, Hong Kong, nychen@ust.hk 1 - Information Provision and Revenue Management in the Presence of Consumer Search Costs Zizhuo Wang, University of Minnesota, 1009 5th Street SE, Minneapolis, MN, 55414, United States, zwang@umn.edu, Yan Liu, William L.Cooper Should a seller make product information readily accessible, so that customers do not have to incur substantive cost to learn about those products? We consider a stylized model with two products to answer this question. We find that if product uncertainties are small but highly correlated, then withholding both products’ information is best for the seller. If the uncertainties are small in both magnitude and correlation, then providing one product’s information but not the other is the best. If the uncertainties are large in both magnitude and correlation, then providing both products’ information is the best. Also, when correlation is low, Ruxian Wang, The Johns Hopkins Carey Business School, 100 International Dr, Baltimore, MD, 21202, United States, ruxian.wang@jhu.edu We incorporate reference price into consumer choice models and investigate the problems on revenue management and pricing. 3 - Are Markets with Loss-averse Consumers More Sensitive to Losses? Zhenyu Hu, National University of Singapore, 15 Kent Ridge Drive, Mochtar Riady Building, BIZ1 8-69, Singapore, 119245, Singapore, bizhuz@nus.edu.sg, Javad Nasiry Behavioral pricing and revenue management aims to incorporate realistic consumer behavior into firms’ pricing and inventory models. The key input to these models is market demand, which is often assumed to inherit the characteristics of consumer behavior—as when, for example, one assumes that a market consisting of loss-averse consumers is more responsive to losses than to gains. The empirical evidences on loss-sensitive demand, however, are frustratingly mixed. We offer one explanation on why gain-sensitive demand and loss-averse consumers can coexist by accounting for the heterogeneity in consumer valuation and examine its implication on firm’s optimal pricing policies. withholding both products’ information cannot be optimal. 2 - Consumer Choice Models with Reference Prices SD40

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