Informs Annual Meeting Phoenix 2018

INFORMS Phoenix – 2018

WB12

2 - Carpooling Service: Social Welfare and Pricing Strategies Shuanglong Wang, University of Illinois at Urbana-Champaign, IL, United States, Zhixi Wan This paper empirically studies the social welfare created by carpooling service on the ride-hailing platform over the counterfactual situation that only the regular- express service is provided. We use the data from Didichuxing, a leading ride-hailing platform in China, to estimate a nested logit model describing riders’ choice behavior over regular express, carpooling and outside options. We also derive a carpooling pricing scheme for optimizing the social welfare and investigate its sensitivity properties. The results show that the carpooling service is advantageous in increasing riders’ surplus and provides an alternative solution to supply-demand matching other than surge pricing. 3 - The Efficiency of a Dynamic Decentralized Two-sided Matching Market Chenyu Yang, University of Rochester, NY, United States, Zhixi Wan, Xiao Liu This paper empirically studies a decentralized dynamic matching market. We use data from a leading ride-sharing platform in China to estimate a continuous time dynamic model of search and match between drivers and passengers. In counterfactual simulations, we assess the efficiency of the decentralized market and examine how centralized algorithms may improve welfare. Compared with the equilibrium in the decentralized market, centralized algorithms can increase both the match quality and the number of matches by making matches less frequently and matching agents more assortatively. 4 - Balancing Supply and Demand: Queuing versus Surge Pricing Mechanisms Zhixi Wan, DiDi Chuxing, Beijing, China, Yueyang Zhong, Max Shen One of the most challenging market-making problem faced all ride-sharing platforms is to deal with the scenarios with high demand and limited supply. Dynamic pricing mechanisms, often called surge pricing, have been used by all major platforms. This talk describes a new mechanism adopted by Didi Chuxing, which uses virtual queuing mechanisms to allocate car supply to waiting riders. It then compares the queuing with the dynamic pricing mechanism in metrics of efficiency, fairness, consumer surplus, etc. n WB12 North Bldg 126A Marketing I Contributed Session Chair: Shelly Rathee, University of Utah, 201 Presidents Cir, Salt Lake City, UT, 84112, United States 1 - Behavior Based Pricing with Heterogeneous Customer Fairness Concern Runyu Tang, PhD Student, Tsinghua University, Haidian District, Beijing, 100084, China Behavior-based pricing (BBP) strategy is getting popular with the development of big data technology. However, the different prices among customers also stir displeasure and may bring a loss of loyalty. Fairness is an essential issue when making BBP pricing decisions. Using an analytical model with heterogeneous fairness concern, I find a monopoly BBP seller’s optimal profit and price gap decrease with stronger fairness concern. When there are two competing sellers with only one of them adopts BBP strategy, the optimal profit for the BBP seller first decreases then increases with customers fairness concern. What’s more, the BBP seller should always charge the new customers with a lower price. 2 - The Effect of Delightful Surprise on Consumer Behavior in the Real World: A Large-scale Field Study Peng-Chun Chen, PhD Student, National Taiwan University, 6F., No.45, Sec. 5, Zhongxiao E. Rd., Xinyi Dist, Taipei, 110, Taiwan Previous research has established a causal relationship between delightful surprise and consumer satisfaction. However, little evidence in the real world has been provided to verify this effect. In this paper, several field studies have been conducted to test the relationship. We collaborate with an online wine e- commerce platform, manipulating the degree and the content of surprise gifts and measuring customers’ satisfaction and the repurchasing behavior afterwards. Our current findings suggest that surprise gifts promote subjects’ satisfaction in a large-scale, real-world setting. 3 - Consumer Choice under Limited Attention When Alternatives Have Different Information Costs Frank Huettner, ESMT Berlin, Schlo platz 1, Berlin, 10407, Germany, Tamer Boyaci, Yalcin Akcay Since information acquisition is costly, consumers trade off the value of better information against its cost and make their product choices based on imperfect information. We model this decision using the rational inattention approach and describe the rationally inattentive consumer’s choice behavior when he faces alternatives with different information costs. We find that non-uniform info costs can have a strong impact on product choice, creating situations where it is

disadvantageous for the seller to provide easy access to information or where adding an inferior product increases the market share of another product. We discuss how our framework can be empirically estimated from choice data. 4 - Modeling Dynamics in Equity-based Crowdfunding Chul Kim, Assistant Professor, Baruch College, CUNY, New York, NY, United States, Pallassana K. Kannan, Michael Trusov, Andrea Ordanini We investigate dynamics characterizing an equity-based crowdfunding: stagnation, gradual increase, and acceleration. We develop a dynamic structural model to accommodate active social interactions among forward-looking investors to capture the contrasting dynamics within a unified framework. We analyze individual investment and network data from a crowdfunding platform, Sellaband. We find that the proposed model shows very good predictive performance. Using counterfactuals, we find the largest possible goal and the smallest possible proportion of profit sharing that maximize the chance of success and the fund raised. 5 - Impact of Structural Changes on Price Markups in Food Retail Sector Lauren Chenarides, Assistant Professor, Arizona State University, 7231 E. Sonoran Arroyo Mall, San Tan 235D, Mesa, AZ, 85212, United States, Mahalingam Dhamodharan We examine the effect of mergers and acquisitions in the food retail sector on price markups. Using store-level retail and defense commissary scanner data, we calculate price markups for nationally branded products at grocery store chains across the U.S. Low markups observed in concentrated markets due to a merger implies a realization of cost efficiencies for retailers, whereas high markups in similar markets post-merger suggest a gain in retailer market power. We use a diff-in-diff model to identify a causal effect of concentration on retail markups that explain these opposing outcomes and their implications. 6 - The Influence of Vague and Precise Waiting Information on Perception of Waiting Time Shelly Rathee, PhD Candidate, University of Utah, Salt Lake City, UT, United States, Arul Mishra, Himanshu Mishra Majiority of patients consider waiting period as often the worst part of doctor’s visit. The type of waiting information provided to patients can take different forms, with different degree of precision. We demonstrate that consumers estimate lower time perception with vague compared to precise waiting information. We employ “take-a-number” queuing system to operationalize vague waiting information with alphanumeric tokens and precise waiting information with numeric tokens and examine how these waiting information influence time perception and patient’s satisfaction. We test our predictions across two field studies at a hospital and one controlled lab study. Chair: Ting Ji, University of Science and Technology of China, 1129 Huizhou Ave, Baohe Qu, Hefei Shi, Anhui Sheng, 230000, China 1 - Optimal (z, Z)-type Contracts for Vendor-managed Inventory Jun-Yeon Lee, Associate Professor, California State University, Northridge, CA, 91330, United States, Richard Cho We examine (z, Z)-type contracts for vendor-managed inventory (VMI) between a supplier and a retailer from the retailer’s perspective. A (z, Z) VMI contract specifies minimum and maximum inventory levels and their corresponding under- and over-stocking penalties. We provide the optimal (z, Z) VMI contract for the retailer and the corresponding optimal replenishment decisions for the supplier and show that the optimal (z, Z) VMI contract can coordinate the supply chain under mild conditions. We also examine a VMI contract with stockout penalty and holding-cost sharing, which is a special type of (z, Z) contract, and find that it may perform well compared with the optimal (z, Z) VMI contract. 2 - Theory of Constraints Replenishment Solution for Managing Distribution of Perishable Items Harshal Lowalekar, Associate Professor, Indian Institute of Management-Indore, Prabandh Shikhar, Rau-Pithampur Road, Indore, 453331, India We develop an analytical model to study the performance of the TOC’s replenishment solution in the context of perishable item supply chains. A setting with one producer and one retailer is considered. The retailer follows an order up to level policy with fixed time interval between two consecutive orders. The items are issued at the retailer’s end in a random sequence. The analytical model shows that the TOC’s replenishment solution will significantly increase the profits of both the producer and the retailer. The product variety and availability at the retailer will increase while the inventory of existing items will decrease due to the TOC approach. n WB13 North Bldg 126B Practice- Supply Chain Management Contributed Session

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