Informs Annual Meeting 2017

MD49

INFORMS Houston – 2017

2 - Mobile App Pricing Models Jie Zhang, University of Texas, 701 South West Street, Room 520, Arlington, TX, 76019, United States, jiezhang@uta.edu, Xiaoxiao Luo In the new App Economy, mobile apps market is becoming very crowded with apps in different categories. We theoretically model and compare three different types of common mobile app pricing models to derive implications for mobile developers. 3 - Real Currency or Virtual Currency: Selling Virtual Items in Digital Games Zixuan Meng, University of Washington, 5000 25th Avenue NE, Room 6201C, Seattle, WA, 98105, United States, zxmeng@uw.edu, Lin Hao, Yong Tan Providers of free-to-play games often gain profits from two sources - selling in- game virtual items and monetizing players’ playtime (e.g. through advertising). Regarding selling virtual items, providers have choices between two popular strategies - (i) selling through real currency only, and (ii) selling through virtual currency only while allowing players to earn virtual currency through their playtime or real currency purchase. This paper studies the provider’s optimal choice between those two strategies. 361A Novel Research Contexts in Behavioral Operations Sponsored: Behavioral Operations Management Sponsored Session Chair: Enno Siemsen, University of Wisconsin-Madison, Madison, WI, 53706, United States, esiemsen@wisc.edu 1 - Production Process Moves and the Impact of Functional Diversity and National Culture MD48 Changing customer demand, increasing production costs, and emerging growth opportunities often generate pressure on firms to relocate their production processes. Although it would be ideal if manufacturing plants could be moved quickly and easily, moving a process is disruptive and involves coping with a new learning curve to ramp-up production. Using behavioral experiments, we examine whether variables such as Functional Diversity and National Culture impact the effectiveness of a proven process template during a production move. Our findings help characterize how a firm’s managers should leverage workforce diversity and how they should factor in cultural differences when planning a move. 2 - A Behavioral Study on Abandonment Decisions in Multi-stage Projects Xiaoyang Long, HKUST.Business School, LSK.Business School, HKUST, Kowloon, Hong Kong, xlongaa@connect.ust.hk, J avad Nasiry, Yaozhong Wu We experimentally investigate continuation/abandonment decisions in a multi- stage project under two conditions: when the project is reviewed at every stage and when review opportunities are limited. We find systematic deviations from the optimal solution: subjects may wrongly continue or abandon the project, and their decisions are path dependent. We propose a behavioral model which explains the behavioral regularities. 3 - A Behavioral Perspective on Inventory Sharing Liang Xu, The Pennsylvania State University, 419A Business Building, Penn State University, State College, PA, 16801, United States, lzx103@psu.edu, Hui Zhao, Enno Siemsen We examine inventory sharing effectiveness from a behavioral perspective. Using behavioral experiments, we show that decision makers do not stock enough to benefit from sharing, and the opportunity to share inventory leads to an even further reduction in the initial inventory stock. Further, decision makers are more likely to under-request inventory, leading to reduced demand signal processing among decision makers. We provide evidence that by reducing inventory transparency in the system and providing decision support, inventory sharing can become effective and increase profitability for participants. 4 - Biased Forecasts: the Impact of Service Level and Product Shelf Life Tarkan Tan, Eindhoven University of Technology, School of Industrial Engineering, Den Dolech 2 Paviljoen F-07, Eindhoven, 5612AZ, Netherlands, t.tan@tue.nl, Meysam Arvan, Behnam Fahimnia, Enno Siemsen Sales forecasts produced by the forecasting team are assumed to simply display the most likely value for product demand. This study aims to understand the extent to which this assumption holds in reality. We want to know if forecasts - in Pettis Kent, University of Minnesota, 321 19th Avenue S, Suite 3-150, Minneapolis, MN, 55455, United States, kentx143@umn.edu

a real-world context for highly-perishable products - are treated as “the most likely values” or more like “decisions”. We refer to the latter as “biased forecasts”. We design an experiment to explore answers to the following questions: to what extent service level requirement and waste minimization are taken into account when developing the base forecasts, and is there a clear relationship between a forecaster’s sustainability beliefs and under-forecasting?

MD49

361B Cognitive Modelling & Experimentation Invited: InvitedBehavioral Aspects of OR Invited Session Chair: Juan Pablo Torres, Universidad De Chile, Santiago, Chile, jtorresc@unegocios.cl Co-Chair: Martin Kunc, University of Warwick, Coventry, CV4 7AL, United Kingdom, martin.kunc@wbs.ac.uk 1 - Neurocognitive Sources of Misperception of Feedbacks in Managerial Decisions Juan Pablo Torres, Universidad de Chile, 257 Diagonal Paraguay, #1204, Santiago, Chile, jtorresc@unegocios.cl, René San Martin This article explores some cognitive sources of misperception of feedback in dynamic environments. Operational Research literature has highlighted two key failures, which explain misperception of feedback: Stock-flow failure and failure to account for time delays. We develop a cognitive neuroscience experiment based on the traditional beergame to understand how the brain processes the stock and flow signals. We recorded and analysed brain electrical responses to the presentation of stock and flow information in an adapted version of the classical beer game. Our preliminary results suggest that, neurally, participants process stock and flow information differently in terms of their recruitment of both attentional and reward-processing circuits in the brain. We discuss how this might be a source of misperception of feedback. 2 - Microfoundation of Pricing Capabilities and its Performance Juan Pablo Torres, Universidad de Chile, 257 Diagonal Paraguay, #1204, Santiago, Chile, jtorresc@unegocios.cl, Claudio Aqueveque, Pablo Tapia We focus on analyzing how business decision-makers implement pricing decisions in complex environments. We developed a simulation-based experiment to test our hypotheses with 124 middle managers. We identified three microfoundations of pricing decisions: pricing flexibility, risk taking on pricing decisions, and strategic consistency of pricing decisions. Preliminary results suggest that information, which is structured as causal maps improve pricing decisions related to pricing flexibility and strategic consistency. This causal map also reduces inconsistencies in strategy implementation. 3 - Improving Mental Models by Haptic Perception of Internal System Dynamics Martin Fg Schaffernicht, Universidad De Talca, Avenida Lircay S/N, Talca Maule, 34600, Chile, martin@utalca.cl, Stefan N. Groesser, Bärbel Fürstenau We consider firms as dynamic resource systems. Internal and external interdependencies influence the development of the resources. The strength of interdependencies and their changes over time cannot be directly perceived in real systems or in on-screen experimental settings. Decision makers perform poorly. We conjecture that interdependency dynamics are more perceivable, performance and understanding improve. Physical levers which require continuous effort to control resources allow improved perception. A simulation with on-screen and haptic interfaces allows to test this hypothesis. We present the theoretic context and initial data. 4 - Effort Reduction in Repeated Rule-based Choices Andres I. Musalem, U. de Chile, Beauchef 851, Santiago, 8370456, Chile, amusalem@duke.edu We explore processes of effort reduction in repeated choices. Decision makers are asked to follow a set of lexicographic rules that are tedious, but easy to get right. Eye tracking reveals the processes that lead to effort reduction with experience. Major gains come from learning the locations and meaning of information in the choice tasks, and from limiting repeated attention to needed information. Smaller gains come from focusing fixations on needed information and spending less time per fixation. Rewards for speed enhance these gains but do not decrease accuracy, and greater effort reduction emerges when a trial period permits learning.

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