Informs Annual Meeting 2017

MA20

INFORMS Houston – 2017

2 - Strategic Open Routing in Service Networks Andrew E. Frazelle, Duke University-Fuqua School of Business, 2616 Erwin Rd, #1302, Durham, NC, 27705, United States, andrew.frazelle@duke.edu, Alessandro Arlotto, Yehua Wei We study the behavior of strategic customers in an open-routing service network with multiple stations. When a customer enters the network, she is free to choose the sequence of stations that she visits, with the objective of minimizing her expected total system time. We propose a two-station game with all customers present at the start of service and deterministic service times, and we find that strategic customers “herd,” i.e., in equilibrium all customers choose the same route. We find that the herding behavior is also prevalent in many other congested open-routing service networks, including those with arrivals over time, those with stochastic service times, and those with more than two stations. 3 - Dynamic Decision Making under Customer Abandonment Risk Jiaqi Lu, Columbia Business School, c/o Clara Magram, 30 We consider a firm repeatedly interacting with a customer. At any time, the firm has to choose between a risky and a safe mode of service. The customer has a propensity to leave if her “happiness”, an average of recent rewards, is low. The hazard rate is a step function that drops to zero at what we call “happiness threshold”. We study how the firm can maximize (discounted) rewards over the customer lifetime by optimally trading off between myopic rewards and the risk of customer abandonment in future. The optimal policy uses the service mode with higher average reward rate everywhere *except*, being risk-averse just above the threshold and risk-seeking just below the threshold. 4 - Choice Paralysis on Operational Decision Making Rene A. Caldentey, The University of Chicago, Booth School of 22 Broadway, New York, NY, 10027, United States, jlu20@gsb.columbia.edu, Yash Kanoria, Ilan Lobel 342A Merchant Commodity and Energy Operations Sponsored: Manufacturing & Service Oper Mgmt, iFORM Sponsored Session Chair: Selvaprabu Nadarajah, University of Illinois at Chicago, College of Business, Chicago, IL, 60607, United States, selvan@uic.edu Co-Chair: Nicola Secomandi, Carnegie Mellon University, Pittsburgh, PA, 15213, United States, ns7@andrew.cmu.edu 1 - Networked Resources and Market Interactions John R. Birge, University of Chicago, Booth School of Business, 5807 South Woodlawn Avenue, Chicago, IL, 60637, United States, John.Birge@ChicagoBooth.edu Networked resources, such as electricity, gas, and data, often involve multiple markets that apply to flows (input and output) and to capacity. Large producers or consumers can often exercise market power that is reduced in the presence of financial traders. Interactions across markets, however, can subvert the goals of financial trader participation and allow for market manipulation. This talk will discuss the design of markets to avoid such situations. 2 - A Spectrum of Optimal Policies for Risk-averse Electric Vehicle Charging We consider the sequential decision problem faced by the manager of an electric vehicle (EV) charging station who faces stochastic spot prices and present new methodology that generates an approximate “spectrum” of risk-averse policies under dynamic risk measures. We investigate the connection to the more traditional risk vs. reward framework. 3 - Managing Aluminium Smelter Robustness Stein-Erik Fleten, Norwegian University of Science & Technology, Dept of Ind Econ & Tech Mgmt, Trondheim, Norway, stein-erik.fleten@iot.ntnu.no, Alessio Trivella, Selvaprabu Nadarajah, Denis Mazieres, David Pisinger Commodity and energy production assets face shutdown risk due to fluctuations in input/output prices and exchange rates. We formulate a new shutdown- specific risk-averse model able to handle the risk of shutdown by operational hedging. An approximate dynamic programming method, the regress-later Daniel Jiang, University of Pittsburgh, 1002 Benedum Hall, 3700 O’Hara Street, Pittsburgh, PA, 15261, United States, drjiang@pitt.edu, Warren B.Powell Business, 5807 S.Woodlawn Ave, Chicago, IL, 60637, United States, rene.caldentey@chicagobooth.edu We empirically investigate the notion of Choice paralysis (i.e., too many options can paralyze a consumer and make them more prone to not purchasing) and study its implications on assortment and inventory decisions. We propose a modification to the nested logs model to incorporate the choice paralysis effect. MA19

variant of Least-squares Monte Carlo, is extended to compute risk-averse operating policies. We tested the new model on a real application related to an aluminium smelter with mothballing and shutdown flexibility. Our results show that the new shutdown risk-averse policy outperforms CVaR-based policies, providing more efficient trade-offs between asset value and shutdown probability. 4 - Optimal Custom Hedge of Quantity Risk Andrea Roncoroni, ESSEC Business School, Cergy-Pontoise, France, roncoroni@gmail.com Commodity-linked positions often exhibit a combined exposure to both market prices and nontradable terms (e.g., harvest, volume, load). We provide a general theory of customized contract design aimed at optimally hedging the corresponding joint risk. Tailored hedges are derivatives written on the underlying tradable and any quoted variable exhibiting statistical dependence on the quantity term. Given agent’s beliefs, mean-variance preferences, and a copula-based setting, we derive analytical solution sought among two-asset contingent claims and numerical solutions for portfolios of one-asset customized hedges. Closed-form solution are computed under separable copula densities. 342B Emerging Issues in Innovation Management Sponsored: Technology, Innovation Management & Entrepreneurship Sponsored Session Chair: Bilal Gokpinar, b.gokpinar@ucl.ac.uk 1 - Shifts in the Counts of Employees and Locations: Impact on Startup Survival Berke Emre Guzelsu, Boston University, 595 Commonwealth Avenue, Boston, MA, 02215, United States, bguzelsu@bu.edu, Nitin Joglekar, Moren Levesque Fifty percent of business startups survive after five years, while about one third survive after ten years. To improve their survival odds, startups must pay attention to changes in their workforce size and in the number of locations in which they operate during their initial unsettled years. We use annual panel data and hazard rate models to analyze the impact of these operational factors on startup survival rates. 2 - Search and Sequential Innovation in Mobile App Development Nilam Kaushik, B-116, Tufnell House, London, N70EG, United Kingdom, uceikau@ucl.ac.uk The process of search, identification, and acquisition of new knowledge is essential for the success of new products. We explore how firms search for ideas in sequential product development through the highly competitive and dynamic setting of mobile application development. Using novel text-mining techniques, we derive measures of similarity between a focal app’s update and updates made by competitor apps and study performance implications thereof. We also explore the performance implications of the dissimilarity of an app’s update with respect to its past updates. 3 - The Impact of Asymmetric Information in Procurement Auctions Joel Wooten, University of South Carolina, 1014 Greene St., Columbia, SC, 29208, United States, joel.wooten@moore.sc.edu Web-based technologies have enabled new possibilities in procurement auctions. We investigate asymmetric information conditions and the behavior of participants with respect to these in an experiment around bids for construction projects. 4 - Dual Innovation, Innovation Abandonment and Innovation Performance Sriram Narayanan, Michigan State University, 632 Bogue Street, Room N357 North Business College Complex, East Lansing, MI, 48824, United States, narayanan@broad.msu.edu, Adrian S.Choo, Ravi Srinivasan, Soumodip Sarkar In this study, we focus on investigating the impact of firms thta undertake dual innovations (both products and services) and innovation abandonment on innovation performance. We perform a large sample investigation to examine this problem using a unique set of archival data with 11,558 manufacturing and service firms located in 11 countries in Europe. We find that dual innovation positively influences a firm’s innovation performance. Innovation performance are measured by sales turnovers and product introductions that are new to the market and new to the firm. MA20

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