Informs Annual Meeting Phoenix 2018

INFORMS Phoenix – 2018

TA19

3 - Platform and Merchant Interactions in Online-to-offline Marketplace Jiaqi Xu, Carnegie Mellon University, Tepper School of Business, 5000 Forbes Avenue, Pittsburgh, PA, 15213, United States, Hui Li, Sridhar R. Tayur There are many forms of online platforms that connect local offline merchants to consumers. These business models are referred to as Online-to-Offline (O2O) commerce. We develop a framework to analyze the pricing decision and revenue sharing arrangements between O2O platforms and local merchants. We show that the pricing incentives for the two parties do not align when the revenue sharing arrangement does not fully account for the long-run revenue generated from attracting new consumers. We offer recommendations on how to design the revenue sharing arrangement and discuss the economic viability of various O2O business models observed in practice. 4 - Surge Pricing Under Spatial Spillover: Evidence from Uber’s Operations Brad Lee, Boston University Questrom School of Business, 595 Commonwealth Ave, Boston, MA, 02215, United States, Marcus A. Bellamy, Nitin Joglekar Ride-sharing platforms employ surge pricing to match anticipated capacity spillover with demand. We develop an optimization model to characterize the relationship between surge price and spillover. We test predicted relationships using a spatial panel model on a dataset from Uber’s operation. Results reveal that Uber’s pricing accounts for both capacity and price spillover. There is a debate in the management community on the efficacy of labor welfare mechanisms associated with shared capacity. We conduct counterfactual analysis to provide guidance in regards to the debate, for managing congestion, while accounting for consumer and labor welfare through this online platform. n TA19 North Bldg 128B Dynamic Preferences in Pricing and RM Sponsored: Revenue Management & Pricing Sponsored Session Chair: Mikhail Nediak, Queen’s University, Kingston, ON, K7L 3N6, Canada 1 - Dynamic Pricing Strategies for Perishable Products Cansu Altintas, Eindhoven University of Technology, Technische Universiteit Eindhoven P.O. Box 513 Pav.F04, Eindhoven, 5600 MB, Netherlands, Shaunak Dabadghao, Zumbul Atan, Tarkan Tan Food waste at the retail level arises for a variety of reasons with expiry of use by date being one of the most common ones. As periodic replenishment practices give rise to the coexistence of units with different expiry dates, customers are inclined to select fresher units which provide a higher perception of quality, as long as there is no price differential. In this study, we consider dynamic discounting as a waste management strategy. We study pricing decisions faced by a retailer selling a perishable product with a shelf life of more than two periods where products with different remaining shelf life can coexist. 2 - Pricing Decisions when Consumers Have Access to Quality Reviews and the Secondary Market Sadegh Kazemi, Washington State University, Pullman, WA, United States, Mike Wei, Michelle Wu We study firm’s pricing strategies when quality reviews are available and customers are strategic. 3 - A Vertical Competition in a Supply Chain with a Cash Constraint Rational Newsvendor Type Retailer and a Supplier Offering Trade Credit Meisam Soltani-koopa, Queen’s University, Unit 306, 220 Eglinton Ave. East, Toronto, ON, M4P 1K4, Canada, Yuri Levin, Mikhail Nediak, Anton Ovchinnikov Trade credit is a form of short-term financing that typically appears as a grace period for invoice payment. We study a supply chain with a supplier and a rational newsvendor type retailer in a form of dynamic Stackelberg game with the supplier as a leader. We examine effects of rationality and ability to make dynamic decisions by both sides and the impact of the cash constraint on the resulting supply-chain outcome. The equilibrium is analyzed using semi-infinite programming approach.

n TA20 North Bldg 129A Mechanism Design Sponsored: Revenue Management & Pricing Sponsored Session Chair: Gabriel Weintraub, Stanford Graduate School of Business, Stanford, CA, 94304, United States 1 - Allocation and Price Guarantees in an Uncertain Internet Advertising Market Antoine Desir, INSEAD, Fontainebleau, France, Maxime Cohen, Nitish Korula, Balasubramanian Sivan Buying display ad impressions via auctions in Internet advertising exchanges comes with significant allocationand price uncertainties. We consider the problem of designing a contract to mitigate this risk. In particular,we propose augmenting the traditional auctions with the option of buying at a premium a Market- Makercontract that removes uncertainties in outcome. We rigorously analyze the equilibrium outcome in thepresence of a Market-Maker contract and show how to design it to yield an improvement both in the seller’srevenue and in the buyer’s utilities, therefore improving the total welfare. 2 - Sequential Procurement through Contractual and Observational Learning Gregory Macnamara, Stanford University, Stanford, CA, United States, Yonatan Gur, Daniela Saban We study a dynamic game of incomplete information that models the interactions between a buyer, who demands the same good or service repeatedly over time, and a seller, who can produce the good at a marginal cost and an average quality that are his private information. The quality of the delivered good is stochastic in each time period and unknown in advance. Moreover, the delivered quality is not (objectively) ex post verifiable. We characterize the equilibrium when the buyer makes price offers and identify two forms of learning that may take place with two types of sellers. We identify key parametric regimes which are characterized Francisco Javier Castro, Columbia University, Columbia School of Business, 527 West 121st, New York, NY, 10027, United States, Gabriel Weintraub, Dirk P. Bergemann We study the classic sequential screening problem in the presence of ex-post participation constraints. We establish when the optimal selling mechanism is static (no screening) and dynamic (screening). Our main result establishes a necessary and sufficient condition under which the static contract is optimal and characterize the optimal contract with binary interim types. If the optimal ex-post prices of the interim types are sufficiently close, no screening is optimal. If they are sufficiently apart, screening is optimal. The latter contract randomizes the low type allocation and gives a deterministic allocation to the high type. We also study the optimal contract in the multiple type setting. 4 - Boosted Second Price Auctions: Revenue Optimization for Heterogeneous Bidders Hamid Nazerzadeh, USC Marshall School of Business, Bridge Memorial Hall - BRI 401B, 3670 Trousdale Parkway, Los Angeles, CA, 90089, United States, Negin Golrezaei, Max Lin, Vahab Mirrokni Due to its simplicity and desirable incentive properties, the second price auction has been the prevalent auction format used by advertising exchanges. However, even with the optimized choice of reserve prices, this auction is not revenue optimal when the bidders are heterogeneous and their valuation distributions differ significantly. In order to optimize the revenue of advertising exchanges, we propose an auction format called the boosted second price auction, which assigns a boost value to each bidder. The auction favors bidders with higher boost values and allocates the item to the bidder with the highest boosted bid. by different structures of the buyer’s optimal learning dynamics. 3 - The Scope of Sequential Screening with Ex-post Participation Constraints

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