Informs Annual Meeting 2017

MA21

INFORMS Houston – 2017

MA21

3 - Non Stationary Online Macthing Victor Araman, American University in Beirut, Lebanon, va03@aub.edu.lb, Dragos Florin Ciocan We consider a number of nodes and an input traffic. Each arrival needs to be matched with one node out of a subset that is selected following a nonstationary distribution. We suggest a simple online allocation policy that performs extremely well. 4 - Optimal Pricing and Introduction Timing of New Virtual Machines Spyros Zoumpoulis, INSEAD, 15 Rue Daubenton, Paris, 75005, France, spyros.zoumpoulis@insead.edu, Ian Kash, Peter Key We characterize the optimal pricing and timing of introductions of new virtual machines for a cloud service provider in the face of customers who are averse to upgrading to improved offerings. We show that a simple policy of periodic introductions and Myerson pricing is near optimal in many situations. 342E Pricing for Logistics and Distribution Sponsored: Revenue Management & Pricing Sponsored Session Chair: Sila Cetinkaya, sila@lyle.smu.edu 1 - Can Dynamic Pricing Reduce What Consumers Pay? Naveed Chehrazi, McCombs School of Business, 2110 Speedway, Stop B6000, Austin, TX, 78712, United States, naveed.chehrazi@mccombs.utexas.edu, Yannis Stamatopoulos, Achal Bassamboo We illustrate that when pricing decisions are made in conjunction with other operational decisions, dynamic pricing can result in increased system efficiencies, which can pass-through to consumers. To demonstrate this point, we equip the traditional economic order quantity (EOQ) setting with a rich demand model and compare social outcomes under two alternatives, dynamic and static pricing. We show that dynamic pricing Pareto-dominates static pricing: it generates higher profit and sales rate for the retailer, while it reduces the average price paid per unit sold for consumers. 2 - Delivery Pricing Strategies for Competing Retailers Chinmoy Mohapatra, University of Texas at Austin, Austin, TX, United States, smilingchin@gmail.com, Anant Balakrishnan, Shankar Sundaresan We study competition between two retailers who can offer consumers different delivery pricing choices: a pay-for-delivery option and/or a subscription option with limited free deliveries. Using a novel utility-based framework with heterogeneous consumers, we demonstrate that the firms can avoid aggressive price competition by offering complementary delivery pricing options in a Stackelberg equilibrium. We characterize the equilibrium delivery pricing policies for both retailers and develop interesting insights. 3 - Smart Logistics in E-commerce - Pricing in Last Mile Delivery Lan Lu, HKUST, Dept. of IELM, Clear Water Bay, Hong Kong, Hong Kong, 00000, Hong Kong, na, Chung-Yee Lee, Chung Piaw Teo We consider a delivery service pricing problem in the view of an e-commerce platform which coordinates the deliveries of many logistics companies. The objective is determining a parcel delivery price to each area to balance the worst- case profits of the couriers. We use the method of optimal transport to model the distributional uncertainty in delivery locations, and propose a cutting plane approach to solve for the optimal set of prices. 4 - A Mathematical Model for Short Term Liquefied Natural Gas (LNG) Delivery Fatih Mutlu, Qatar University, Doha, Qatar, fatihmutlu@qu.edu.qa LNG suppliers prepare approximate annual plans for the delivery of LNG contracts. During the implementation stage, short-term portions of these plans should be adjusted so as to finalize the exact loading days and assigned vessels and to exploit the additional sales opportunities that recently arose. We develop a comprehensive mathematical model for maximizing the revenues from additional sales minus the penalty costs associated with deviating from the annual plan. Through a comprehensive numerical study, we analyze the sensitivity of profit on vessel capacity and demand-to-capacity ratio. 5 - Coordination via Pricing in the Reverse Channel Sila Cetinkaya, SMU, Dallas, TX, United States, sila@smu.edu, Elif Akcali, Yi Zhang In this paper, we study an extension of the traditional channel coordination problem that arises in the context of a reverse supply chain that is comprised of a collector-remanufacturer pair. We investigate effective pricing mechanisms enhancing the efficiency of collection logistics under a general stochastic return process. MA23

342C Supply Chain Finance Sponsored: Manufacturing & Service Oper Mgmt, iFORM Sponsored Session Chair: Lingxiu Dong, Washington University, Saint Louis, MO, Gerry Tsoukalas, Wharton School of Business, 3730 Walnut Street, 567 Jon M. Huntsman Hall, Philadelphia, PA, 19104, United States, gtsouk@wharton.upenn.edu, Jiri Chod, Nikolaos Trichakis Arguably the most common explanation of supplier diversification is hedging against supplier risks. We provide an alternative explanation based on buyer risks: In the presence of information asymmetry regarding buyer creditworthiness, buyers may take costly action to signal their quality to suppliers. We find that while signaling is effective at overcoming initial information asymmetry, under single sourcing, it leaves the supplier with an information monopoly that leads to hold-up in future periods. In this context, we show that ex ante supply base diversification can be effective at alleviating ex post informational holdup, but also comes at the expense of higher upfront costs. 2 - A Supply Chain Theory of Factoring and Reverse Factoring Fasheng Xu, Washington University in St. Louis, Saint Louis, MO, 63130, United States, fasheng.xu@wustl.edu, Panos Kouvelis, Wenhui Zhao To free up supplier’s liquidity inhibited by retailer’s payment deferral, factoring contracts are often used as post-shipment financing schemes. We find that in a pull system the benefits of recourse factoring are limited, but non-recourse factoring achieves surprisingly better performance by eliminating market frictions and reducing the cash-to-cash cycle. Further, we show how the retailer can help shoulder the supplier’s financial burden through reverse factoring contracts with payment guarantee. We find it’s not always optimal to extend payment term and the optimally designed reverse factoring contract can coordinate the decentralized supply chain with arbitrary profit allocation. 3 - Financing SME Sellers via E-commerce Platform Lingxiu Dong, Washington University, Campus Box 1156, One Brookings Drive, Saint Louis, MO, 63130-4899, United States, dong@wustl.edu, Long Ren, Dennis Zhang Small-business sellers selling products via e-retailing platforms often face capital constraints that limit their ability to build inventory and expand product offerings. E-commerce platform steps up with new financing scheme to help these sellers to grow. We consider sellers’ financing issue with e-commerce platform intervention, in both monopoly and competition scenarios. We show that although in the monopoly setting both the seller and the platform benefit from the platform’s loan, in the competition setting the platform’s loan may intensify the seller competition. We suggest alternative loan offerings to dampen the competition. 342D Topics in Revenue Management Sponsored: Revenue Management & Pricing Sponsored Session Chair: Dragos Florin Ciocan, INSEAD, INSEAD, Fontainebleau, France, florin.ciocan@insead.edu 1 - Near-optimality of Myopic Markdowns in the Presence of Strategic Consumers Anton Ovchinnikov, Stephen J.R. Smith School of Business, Queen’s University, anton.ovchinnikov@insead.edu, Dragos Florin Ciocan Much of the research on dynamic pricing with strategic consumers assumes that all consumers are strategic. The empirical data, and the experimental results, however, show that a non-insignificant proportion of consumers behave myopically. Our paper demonstrates that in such situations pricing as if all consumers are myopic often leads to higher revenues than pricing as if all consumers are strategic. 2 - Operational Challenges for Decentralized Manufacturing Andre Du Pin Calmon, INSEAD, Boulevard de Constance, Fontainebleau, 77300, France, andre.calmon@insead.edu, Victor Araman, Anton Ovchinnikov Motivated by a social enterprise in Kenya that manufactures fashion accessories using a distributed network of artisans, we analyze the operational challenges of managing a decentralized “virtual” factory. The artisans have limited budgets, capabilities, and varying production quality, while the company faces uncertain demand. We investigate various operational issues that emerge in this unique business model. MA22 63130-4899, United States, dong@wustl.edu 1 - Supplier Diversification under Buyer Risk

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