http://www.rssboard.org/rss-specification 720 https://escholarship.org/uc/anderson_dotm/rss Recent eScholarship items from Decisions, Operations, and Technology Management Sun, 21 Jun 2026 18:15:46 +0000 https://escholarship.org/uc/item/82d916c1 Motivated by retailers' frequent introduction of new items to refresh product lines and maintain their market share, we present the assortment packing problem in which a firm must decide, in advance, the release date of each product in a given collection over a selling season. Our formulation models the trade-offs among profit margins, preference weights, and limited life cycles. A key aspect of the problem is that each product is short-lived in the sense that, once introduced, its attractiveness lasts only a few periods and vanishes over time. The objective is to determine when to introduce each product to maximize the total profit over the selling season. Even for two periods, the corresponding optimization problem is shown to be NP-complete. As a result, we study a continuous relaxation of the problem that approximates the problem well when the number of products is large. When margins are identical and product preferences decay exponentially, its solution can be characterized:... https://escholarship.org/uc/item/82d916c1 Mon, 9 Apr 2012 00:00:00 +0000 Caro, F. Martinez-de-Albeniz, V. Rusmevichientong, P. https://escholarship.org/uc/item/4mc1z48n We consider the Retail Planning Problem in which the retailer chooses suppliers, and determines the production, distribution and inventory planning for products with uncertain demand in order to minimize total expected costs. This problem is often faced by large retail chains that carry private label products. We formulate this problem as a convex mixed integer program and show that it is strongly NP-hard. We determine a lower bound by applying a Lagrangean relaxation and show that this bound out- performs the standard convex programming relaxation, while being computationally efficient. We also establish a worst-case error bound for the Lagrangean relaxation. We then develop heuristics to generate feasible solutions. Our computational results indicate that our convex programming heuristic yields feasible solutions that are close to optimal with an average suboptimality gap at 3.4%. We also develop managerial insights for practitioners who choose suppliers, and make production,... https://escholarship.org/uc/item/4mc1z48n Mon, 2 Apr 2012 00:00:00 +0000 Georgiadis, G. Rajaram, K. https://escholarship.org/uc/item/6cg5z5js Every year, companies that produce consumer tax preparation software struggle with a massive amount of work imposed by thousands of state and federal changes to tax laws and forms. With their release not even beginning before August, these changes still must be processed and incorporated into the application by mid- December. Three companies dominate this competitive market with its short selling season so that release delays create significant losses. Though systematic resource allocation and process management are crucial, the volume and complexity of the changes, the brief timeframe to implement them, and feedback loops built into the system for error resolution make it extremely difficult to analyze the process. One of the leading tax software providers tasked us with developing systematic approaches for managing the process flow and staffing each stage so that the company met the deadline at the lowest cost. Based on the characteristics of the process, we develop deterministic... https://escholarship.org/uc/item/6cg5z5js Fri, 28 Oct 2011 00:00:00 +0000 Iravani, F. Dasu, S. Ahmadi, R. https://escholarship.org/uc/item/6545t5bf We investigate the adoption of energy efficiency initiatives using information on over 100,000 recommendations provided to more than 13,000 small and medium sized firms under the Industrial Assessment Centers (IAC) program of the US Department of Energy (DOE). We build on an earlier study by Anderson and Newell (2004) that explored the impact of economic factors on the adoption of energy efficiency initiatives, by investigating the role of behavioral factors on the adoption of energy efficiency initiatives. Using a probit instrumental variable model, we investigate three behavioral factors that could affect investment in energy efficiency. First, we find that adoption of a recommendation depends not only on its characteristics but also on the order in which the recommendations are presented. Adoption rates are higher for initiatives appearing early in a list of recommendations. We find evidence that this may in part be due to anchoring effects. Second, we find that adoption is... https://escholarship.org/uc/item/6545t5bf Fri, 28 Oct 2011 00:00:00 +0000 Muthulingam, S. Corbett, C. J. Benartzi, S. Oppenheim, B. https://escholarship.org/uc/item/4g32s6h1 <p>In this paper we apply emerging theories in probability and statistics to examine the value of pooling of inventories under arbitrary non-normal dependent demand structures. Eppen (1979) showed that inventory costs in a centralized system increase with the correlation between multivariate normal product demands; using multivariate stochastic orders, we generalize this statement to arbitrary distributions. We then describe methods to construct models with arbitrary dependence structure, using the copula of a multivariate distribution to capture the dependence between the components of a random vector. For broad classes of distributions with arbitrary marginals, we confirm that pooling of inventories is more valuable when demands are less positively dependent.</p> https://escholarship.org/uc/item/4g32s6h1 Fri, 28 Oct 2011 00:00:00 +0000 Corbett, Charles J. Rajaram, Kumar https://escholarship.org/uc/item/46x0n36c Diverting large quantities of goods from authorized distribution channels to unauthorized or â��gray marketâ�� channels, albeit legal, significantly affects both firms and consumers due to effects on price, revenue, service and warranty availability, and product availability. In this paper we consider mechanisms by which the uncertainty surrounding inventory ordering decisions drives gray markets. We start with a minimal stochastic supply chain model composed of a producer and a retailer; then we restructure the model to add a distributor whereby the distributor and authorized retailer have the option of diverting inventory to a gray market. Our analysis sheds light on three issues: impacts of diversion on the various supply chain participants, strategies producers could use to combat or exploit gray markets, and important considerations for authorized retailers trying to set optimal order quantities in the presence of a gray market. Our analysis yields new insights into the behavior... https://escholarship.org/uc/item/46x0n36c Fri, 28 Oct 2011 00:00:00 +0000 Ahmadi, R. Carr, S. M. Dasu, S. https://escholarship.org/uc/item/3s01b6pg Carbon footprinting is a tool for firms to determine the total greenhouse gas (GHG) emissions associated with their supply chain or with a unit of final product or service. Carbon footprinting efforts typically aim to identify where best to invest in emission reduction efforts, and/or to determine the proportion of total emissions that an individual firm is accountable for, whether financially and/or operationally. A major and under-recognized challenge in determining the appropriate allocation stems from the high degree to which GHG emissions (or emissions reductions) are the result of joint efforts by multiple firms.In this paper we introduce a simple but effective model of joint production of GHG emissions in general supply chains, decomposing the total footprint into processes, each of which can be influenced by any combination of firms. A supply chain in which all firms exert their first-best emissions reduction effort levels is â��carbon optimalâ��, while a supply chain... https://escholarship.org/uc/item/3s01b6pg Fri, 28 Oct 2011 00:00:00 +0000 Caro, F. Corbett, C. J. Tan, T. Zuidwijk, R. https://escholarship.org/uc/item/21f905rc This paper introduces a new generalized version of the Traveling Salesman Problem (TSP) in which nodes belong to various color classes and each color class must be visited as an entity. We distinguish the cases of the problem for which the colors are either pre-assigned or can be selected from a given subset of colors. We establish computational complexity and provide concise formulations for the problems that lend themselves to derive tight lower bounds. Exact solutions for special cases and a two-phase heuristic for the general case are provided. Worst case performance and asymptotic performance of the heuristic are analyzed and the effectiveness of the proposed heuristic in solving large industrial size problems is empirically demonstrated. https://escholarship.org/uc/item/21f905rc Fri, 28 Oct 2011 00:00:00 +0000 Roemer, T. A. Ahmadi, R. Dasu, S. https://escholarship.org/uc/item/1kt633qj Gray markets, also known as parallel imports, are marketplaces for trading genuine products that are diverted from authorized distribution channels. They have created fierce competition for manufacturers in many industries and each year billions of dollars worth of products are traded in these markets. Using a game-theoretic model, we analyze the impact of parallel importation on a price-setting manufacturer that serves two markets with uncertain demand. We characterize the optimal joint price and quantity decisions of the manufacturer which determine whether the manufacturer should ignore, block, or allow parallel importation. We also show that parallel importation forces the manufacturer to reduce her price gap while demand uncertainty forces her to lower prices in both markets. Moreover, we observe that parallel importation may force the manufacturer to exit the low-profit market. Through extensive numerical experiments, we explore the impact of market conditions (size and... https://escholarship.org/uc/item/1kt633qj Fri, 28 Oct 2011 00:00:00 +0000 Iravani, F. Mamani, H. Ahmadi, R. https://escholarship.org/uc/item/771798jd <p>Consider a mechanism design setting in which agents acquire costly information about an unknown, payoff-relevant state of nature. Information gathering is covert and the agents' information is correlated. We investigate conditions under which (i) efficiency and (ii) full surplus extraction are Bayesian incentive compatible and interim individually rational.</p> https://escholarship.org/uc/item/771798jd Fri, 29 Jul 2011 00:00:00 +0000 Bikhchandani, S. Obara, I. https://escholarship.org/uc/item/2xx44479 <p>We investigate a model in which one seller and one buyer trade in each of two periods. The buyer has demand for one unit of a non-durable object per period. The buyer's reservation value for the good is private information and is the same in both periods. The seller commits to prices in each of two periods. Prices in the second period may depend on the buyer's first-period behavior. Unlike the equal discount factor case studied in earlier papers, we show that when the seller is more patient than the buyer, second-period prices increase after a purchase. In particular, the optimal dynamic pricing scheme is not a repetition of the optimal static pricing scheme.</p> https://escholarship.org/uc/item/2xx44479 Fri, 29 Jul 2011 00:00:00 +0000 Bikhchandani, S. McCardle, K. https://escholarship.org/uc/item/0fm8d8sv <p>Fast-fashion retailers such as Zara offer continuously changing assortments and use minimal in-season promotions. Their clearance pricing problem is thus challenging because it involves comparatively more different articles of unsold inventory with less historical price data points. Until 2007, Zara used a manual and informal decision-making process for determining price markdowns. In collaboration with their pricing team, we designed and implemented since an alternative process relying on a formal forecasting model feeding a price optimization model. As part of a controlled field experiment conducted in all Belgian and Irish stores during the 2008 Fall-Winter season, this new process increased clearance revenues by approximately 6%. Zara is currently using this process worldwide for its markdown decisions during clearance sales.</p> https://escholarship.org/uc/item/0fm8d8sv Wed, 1 Jun 2011 00:00:00 +0000 Caro, F. Gallien, J. https://escholarship.org/uc/item/3bw7h6qj <p>While advance booking programs have been shown to be effective for firms to manage uncertain demand, the effectiveness of such programs is unclear when supply, demand, and price risks are present in a supply chain. Motivated by an advance booking program for managing these three types of risks in a flu vaccine supply chain, we present a two-stage Stackelberg game model to examine the dynamic interactions between a manufacturer and a retailer over two stages. In each stage, both firms enter a Stackelberg game: the manufacturer sets his wholesale price and the retailer determines her order quantity. However, when making the decisions in the second stage, both firms take into account the decisions chosen in the first stage as well as the information about supply and demand revealed after the first stage. Our analysis shows that the advance booking program is always beneficial to the manufacturer but not to the retailer especially when a supply shortage is likely to occur. Interestingly,... https://escholarship.org/uc/item/3bw7h6qj Fri, 12 Mar 2010 00:00:00 +0000 Cho, S.-H. Tang, C. S. https://escholarship.org/uc/item/0sj6d6xx <p>We study two reservation deposit policies for a service firm to increase its revenue through higher capacity utilization. First, under the "no deposit" policy, the firm requires no reservation deposit and imposes no "no show" penalty. Anticipating potential "no shows," a firm may overbook; hence, there is no guarantee that the reserved service will be provided under the no deposit policy. On the contrary, under the "guarantee deposit" policy, a guarantee deposit is required for each customer to make a non-cancelable reservation. To honor the reserved service under the guarantee deposit policy, the firm will not overbook. We analyze each deposit policy as a Stackelberg game in which the firm acts as the leader who selects the booking capacity under the no deposit policy (or the required deposit under the guarantee deposit policy), and each customer acts as the follower who decides whether to reserve or not. Our model incorporates rational customer behavior so that each customer... https://escholarship.org/uc/item/0sj6d6xx Fri, 12 Mar 2010 00:00:00 +0000 Georgiadis, G. Tang, C. S. https://escholarship.org/uc/item/0dg428k9 <p>We propose procedures to address product design and manufacturing process configurations concurrently in environments characterized by large degrees of product proliferation. Exploiting the intrinsic flexibility of product and process design, we present two approaches that synchronize production flows through the manufacturing system. These approaches integrate product and manufacturing system design decisions with operational concerns and provide powerful means for managing production in environments characterized by a proliferation of products. Experimental results show that the proposed methods can substantially reduce manufacturing lead times, work in process (WIP), and overall system complexity.</p> https://escholarship.org/uc/item/0dg428k9 Fri, 1 May 2009 00:00:00 +0000 Ahmadi, R. H. Roemer, T. A. https://escholarship.org/uc/item/2zk6f5bk <p>In this paper, we analyze the contracting issues that arise in collaborative services, such as consulting, financial planning, and IT outsourcing. Analyzing first a bilateral relationship, we assume that neither the buyer's nor the vendor's efforts are directly observable, resulting in double moral hazard. We investigate the efficiency of fixed-fee, time-and-materials, and performance-based contracts. We find that fixed-fee contracts are the least responsive to unplanned contingencies, time-and-material contracts are associated with high monitoring costs, and performance-based contracts do not incentivize agents to exert high levels of effort. We then show that our results are robust with respect to the number of vendors involved in the joint production process. On the other hand, the involvement of multiple buyers in the joint-production process creates an additional negative externality, akin to free riding, unless the vendor prescribes all buyers' actions. Our model highlights... https://escholarship.org/uc/item/2zk6f5bk Mon, 10 Nov 2008 00:00:00 +0000 Roels, G. Karmarkar, U. Carr, S. https://escholarship.org/uc/item/45w2505r <p>We consider a competitive version of the traditional aggregate production planning model with capacity constraints. In the general case, multiple products are produced by a group of competing producers with limited capacities. Production quantities, prices and consequently profits depend on production and allocation decisions of each producer. In addition, there is competition for the raw material whose supplies are limited, and where prices reflect these limitations. Such situations have recently occurred in several process industry settings including the petro-refining and metal processing sectors, such as steel and copper. We use a successive “Bertrand-Cournot” framework to address this problem and to determine optimal production quantities, prices and profits at the producers and at the raw material supplier.</p> https://escholarship.org/uc/item/45w2505r Thu, 1 May 2008 00:00:00 +0000 Karmarkar, U. S. Rajaram, K. https://escholarship.org/uc/item/9hm266cx <p>Revenue management models traditionally assume that future demand is unknown, but can be represented by a stochastic process or a probability distribution. Demand is however often difficult to characterize, especially in new or nonstationary markets. In this paper, we develop robust formulations for the capacity allocation problem in revenue management, using the maximin and the minimax regret criteria, under general polyhedral uncertainty sets. Our approach encompasses the following open-loop controls: partitioned booking limits, nested fare classes by origin-destination pairs, Displacement-Adjusted Virtual Nesting, and fixed bid prices. We also characterize the optimal booking policy under interval uncertainty; while partitioned booking limits are optimal under the maximin criterion, some nesting is desirable under the minimax regret criterion. Our numerical analysis reveals that robust controls can outperform the classical heuristics for network revenue management, while... https://escholarship.org/uc/item/9hm266cx Fri, 28 Sep 2007 00:00:00 +0000 Perakis, G. Roels, G. https://escholarship.org/uc/item/70z2c7bv <p>This paper studies competition for shelf space in a multi-supplier retail point. We consider a retailer that seeks to allocate her shelf space to maximize her profit. Because products associated with larger profit margin are granted more shelf space, suppliers can offer the retailer financial incentives to obtain larger space allocations. We analyze the competitive dynamics arising from the scarcity of space, and show existence and uniqueness of equilibrium. We then demonstrate that the inefficiencies from decentralizing decision-making are limited to 6% with wholesale-price contracts, and that full coordination can be achieved with pay-to-stay fee contracts. We finally investigate how competition is distorted under the practice of category management.</p> https://escholarship.org/uc/item/70z2c7bv Fri, 28 Sep 2007 00:00:00 +0000 Martínez-de-Albéniz, V. Roels, G. https://escholarship.org/uc/item/2hc5v77z <p>This work empirically assesses the degree to which inventory decisions made by entrepreneurs and small businesses are informed by the logic underlying the newsvendor or base stock model and are influenced by the decision-maker’s risk profile. We used a web- and email-based survey, combined with a telephone follow-up to elicit risk profiles, obtaining 51 usable responses. Our findings suggest that entrepreneurs do follow the newsvendor logic, but more so for high-margin than for best-selling products. We find that entrepreneurs’ risk profiles are consistent with a key prediction from prospect theory, displaying risk aversion for profits and risk-seeking behavior for losses. Furthermore, we find that risk aversion for profits is associated with higher safety stocks, in contradiction to existing theory, and discuss several possible explanations for this finding.</p> https://escholarship.org/uc/item/2hc5v77z Wed, 22 Aug 2007 00:00:00 +0000 Corbett, C.J. Fransoo, J.C. https://escholarship.org/uc/item/0jp9g6st <p>We examine the role of signaling and of intrinsic benefits in the adoption of the individual elements of the voluntary LEED (Leadership in Energy and Environmental Design) standards for green buildings. We use goodness-of-fit tests on data for all 442 LEED certified buildings and find that neither signaling nor pursuit of intrinsic benefits can independently explain the observed adoption pattern, but that a combination of the two factors can. We also find tentative evidence that the adoption decision is made sequentially: organizations first choose a level of certification (consistent with signaling), and then choose how many LEED elements to adopt given their chosen level of certification (consistent with pursuing intrinsic benefits). We relate our findings to some open questions in the literature on diffusion of technology and draw implications for the design and the future development of similar voluntary standards and eco-labels.</p> https://escholarship.org/uc/item/0jp9g6st Wed, 22 Aug 2007 00:00:00 +0000 Corbett, C.J. Muthulingam, S. https://escholarship.org/uc/item/1fn1v5cv <p>We consider a resource allocation problem in which time is the principal resource. Utility is derived from time-consuming leisure activities, as well as from consumption. To acquire consumption, time needs to be allocated to income generating activities (i.e., work). Leisure (e.g., social relationships, family and rest) is considered a basic good, and its utility is evaluated using the Discounted Utility Model. Consumption is adaptive and its utility is evaluated using a reference-dependent model. Key empirical findings in the happiness literature can be explained by our time allocation model. Further, we examine the impact of projection bias on time allocation between work and leisure. Projection bias causes individuals to overrate the utility derived from income; consequently, individuals may allocate more than the optimal time to work. This misallocation may produce a scenario in which a higher wage rate results in a lower total utility.</p> https://escholarship.org/uc/item/1fn1v5cv Tue, 12 Jun 2007 00:00:00 +0000 Baucells, M. Sarin, R. K. https://escholarship.org/uc/item/3b85p65k <p>Why do we believe that more money will buy us more happiness (when in fact it does not)? In this paper, we propose a model to explain this puzzle. The model incorporates both adaptation and social comparison. A rational person who fully accounts for the dynamics of these factors would indeed buy more happiness with money. We argue that projection bias, the tendency to project into the future our current reference levels, precludes subjects from correctly calculating the utility obtained from consumption. Projection bias has two effects. First, it makes people overrate the happiness that they will obtain from money. Second, it makes people misallocate the consumption budget by consuming too much at the beginning of the planning horizon, or consuming too much of adaptive goods.</p> https://escholarship.org/uc/item/3b85p65k Thu, 1 Feb 2007 00:00:00 +0000 Baucells, M. Sarin, R. K. https://escholarship.org/uc/item/92c8m634 <p>Business information services are intermediaries that collect, collate, package and distribute information of value to professional users. We consider two technologies that such intermediaries may use for delivering information. First, a packaged design that uses physical media like CD-ROMs to distribute information. Second, an online service that delivers such information via the Internet or other online networks. We model a market where subscribers may choose between "self-service", where they collect and collate information directly from sources, and a third party service provider who provides either a packaged design or an online service. Subscribers are indexed by their volume of usage for the service. In a duopoly, we show that providers with online or package technologies will serve different market segments. The package provider’s limited ability to provide current information, combined with decreasing search costs in an online service will make a package provider increasingly... https://escholarship.org/uc/item/92c8m634 Thu, 13 Apr 2006 00:00:00 +0000 Anant, B. Karmarkar, U. S. https://escholarship.org/uc/item/9v94p2hj <p>The view that adopting an environmental perspective on operations can lead to improved operations is in itself not novel; phrases such as “lean is green” are increasingly commonplace. The implication is that any operational system that has minimized inefficiencies is also more environmentally sustainable. However, in this paper we argue that the underlying mechanism is one of extending the horizons of analysis, and that this applies to both theory and practice of operations management. We illustrate this through two principal areas of lean operations, where we identify how successive extensions of the prevailing research horizon in each area have led to major advances in theory and practice. First, in quality management, the initial emphasis on statistical quality control of individual operations was extended through TQM to include a broader process encompassing customer requirements and supplier’s operations. More recently, the environmental perspective extended the definition... https://escholarship.org/uc/item/9v94p2hj Fri, 24 Mar 2006 00:00:00 +0000 Corbett, C. J. Klassen, R. D. https://escholarship.org/uc/item/2wp1c2z5 <p>We study competition between two multi-product firms with distinct production technologies in a market where customers have heterogeneous preferences on a single taste attribute. The mass customizer (MC) has a perfectly flexible production technology, thus can o.er any variety within a product space, represented by Hotelling’s (1929) linear city. The mass producer (MP) has a more focused production technology, and therefore, it offers a finite set of products in the same space. MP can invest in more flexible technology, which reduces its cost of variety and hence allows it to offer a larger set of products; in the extreme, MP can emulate MC’s technology and offer infinite variety. The firms simultaneously decide whether to enter the market, and MP chooses its degree of product-mix flexibility upon entry. Next, MP designs its product line, i.e., the number and position of its products; MC’s perfectly flexible technology makes this unnecessary. Finally, both firms simultaneously... https://escholarship.org/uc/item/2wp1c2z5 Fri, 24 Mar 2006 00:00:00 +0000 Alptekinoglu, A. Corbett, C. J. https://escholarship.org/uc/item/2946z7zh <p>We study the problem of the manager of a project consisting of two sub-projects or tasks which are outsourced to different subcontractors. The project manager earns more revenue from the project if it is completed faster, but he cannot observe how hard subcontractors work, only the stochastic duration of their tasks. We derive the optimal linear incentive contracts to o.er to the subcontractors when the tasks are conducted in series or in parallel. We compare them to the fixed-price contracts often encountered in practice, and discuss when incentive contracts lead to bigger performance improvement. We characterize how the incentive contracts vary with the subcontractors’ risk aversion and cost of effort, the marginal effect of subcontractor effort, and the variability of task durations. We find that this dependence is sometimes counter-intuitive in nature. For instance, for parallel tasks, if the first agent’s task is on the critical path and his variability increases, the... https://escholarship.org/uc/item/2946z7zh Fri, 24 Mar 2006 00:00:00 +0000 Bayiz, M. Corbett, C. J. https://escholarship.org/uc/item/9jr5r2kz <p>This article studies the static pricing problem of a network service provider who has a fixed capacity and faces different types of customers (classes). We consider a single-bandwidth tree network, meaning that each class can have its own capacity constraint but it is assumed that all classes have the same resource requirements. The provider must decide a static price for each class. The customer types are characterized by their arrival process, with a price-dependant arrival rate, and the random time they remain in the system. The goal is to characterize the optimal static prices in order to maximize the provider's revenue. We report new structural findings and insights, illustrative numerical examples, and alternative proofs for some known results. This problem was originally thought for a company that sells phone cards and needs to set the price-per-minute for each destination.</p> https://escholarship.org/uc/item/9jr5r2kz Wed, 1 Mar 2006 00:00:00 +0000 Caro, F. Simchi-Levi, D. https://escholarship.org/uc/item/9dh327q9 <p>Upgrades are endemic in the software industry and create the possibility that customers might either postpone purchase or buy early on and never upgrade: When will a customer upgrade? Is it better to upgrade now or to wait for an improved version? When should we release an improved product? How much should we charge for each version? Should we give discounts on upgrades to existing customers? Will today’s sales be cannibalized by the anticipated improved version? We focus on pricing and how it is affected by the degree to which a product is improved between versions. In particular, we are interested how the firm should price different versions of its product and whether it should offer “upgrade discounts” to existing customers. To address these issues, we analyze a two-period model in which a firm sells an initial version of its product in the first period and an improved version the second. In each period, the firm (i.e., the software supplier) selects the selling prices,... https://escholarship.org/uc/item/9dh327q9 Fri, 24 Feb 2006 00:00:00 +0000 Bala, R. Carr, S. C. https://escholarship.org/uc/item/7wj7k224 <p>An emerging market or market segment provides firms both the opportunity to enter early and capture market share and also the risk that the market will turn out to be less fruitful than expected. We formulate and analyze a game-theoretic model in which multiple firms with uncertain and/or disparate beliefs about the eventual market size decide whether to enter such a market. For increasingly general models, we show that the structure (i.e. the number and identity of participating firms) and profitability of equilibrium oligopolies can be determined by a classification schemes based on the firms' beliefs about the viable level of market concentration. This scheme is adapted to random forecasts (i.e. forecasts expressed as probability distributions) as well as point forecasts. This study was motivated by managerial issues encountered by a client firm engaged in semiconductor design.</p> https://escholarship.org/uc/item/7wj7k224 Fri, 24 Feb 2006 00:00:00 +0000 Carr, S. C. https://escholarship.org/uc/item/6xb7q4ns <p>We analyze and compare fixed-fee and usage-fee software pricing schemes - in fixed-fee pricing, all users pay the same price; in usage-fee pricing, the users’ fees depend on the amount that they use the software (e.g., the user of an online-database service might be charged for each data query). We employ a two-dimensional model of customer heterogeneity - specifically, we assume that customers vary in the amount that they will use the software (usage heterogeneity) and also in their per-use valuation of the software.</p><p>To understand the performance of these pricing schemes and their sensitivity to the competitive environment in which they are used, we look at a number of different scenarios: a monopolist offering just one of these schemes, a monopolist offering a choice of pricing schemes, and several duopoly scenarios. We characterize and compare the equilibria that arise in these scenarios and provide insights into optimal pricing strategies.</p> https://escholarship.org/uc/item/6xb7q4ns Fri, 24 Feb 2006 00:00:00 +0000 Bala, R. Carr, S. C. https://escholarship.org/uc/item/5rh9q995 <p>We characterize incentive compatibility in multi-unit auctions with multi-dimensional types. An allocation mechanism is incentive compatible if and only if it is nondecreasing in marginal utilities (NDMU). The notion of incentive compatibility we adopt is dominant strategy in private value models and ex post incentive compatibility in models with interdependent values. NDMU is the following requirement: if changing one buyer’s type, while keeping everyone else’s types the same, changes this buyer’s allocation then the new allocation must be relatively more attractive (or relatively less unattractive) to this buyer. We also establish a price characterization of incentive compatible mechanisms.</p> https://escholarship.org/uc/item/5rh9q995 Fri, 27 Jan 2006 00:00:00 +0000 Bikhchandani, S. Chatterjee, S. Sen, A. https://escholarship.org/uc/item/25d1300m <p>We empirically examine the link between the when-issued market and the auction for Treasury bills. We find that on average it is cheaper to buy Treasury bills in the auction than in the when-issued market just before the auction closes. Surprisingly, primary dealers often submit bids in the auction that are higher in price than the concurrent when-issued ask price. We present evidence to show that this is due to the cost of revealing positive information too early by trading in when-issued markets before the auction. In addition, we examine what determines the dispersion of bids in the auction as well as test for collusive behavior in the bidding process.</p> https://escholarship.org/uc/item/25d1300m Fri, 27 Jan 2006 00:00:00 +0000 Bikhchandani, S. Edsparr, P. Huang, C. https://escholarship.org/uc/item/7rs7k66x <p>Ambiguity aversion has been widely observed in individuals’ judgments. Using scenarios that are typical in decision analysis, we investigate ambiguity aversion for pairs of individuals. We examine risky and cautious shifts from individuals’ original judgments to their judgments when they are paired up in dyads. In our experiment the participants were first asked to specify individually their willingness-to-pay for six monetary gambles. They were then paired at random into dyads, and were asked to specify their willingness-to-pay amount for the same gambles. The dyad’s willingness-to-pay amount was to be shared equally by the two individuals. Of the six gambles in our experiment, one involved no ambiguity and the remaining five involved ambiguity with different degrees of familiarity. We found that dyads exhibited both risk aversion as well as ambiguity aversion. Further, when facing ambiguity, dyads’ willingness-to-pay amounts are sometimes more and sometimes less than the... https://escholarship.org/uc/item/7rs7k66x Fri, 8 Nov 2002 00:00:00 +0000 Keller, L. Robin Sarin, Rakesh K. Sounderpandian, Jayavel https://escholarship.org/uc/item/7rj92442 <p>For decisions whose consequences accrue over time, several techniques are possible to compute total utility. One is to discount utilities of future consequences at some appropriate rate. The second is to discount per-period certainty equivalents. And the third is to compute net present value of various possible streams and then apply utility function to these net present values. When consequences are income streams, our main result shows that for a strict concave utility function, discounting utilities of incomes or discounting per period certainty equivalents can result in a paradoxical preference for receiving more money later to more money now. For income streams, the correct approach is to …rst compute net present values of various possible income streams and then take the utility of such net present value. The discounted utility model is appropriate for consumption streams, provided that the time intervals between periods are sufficiently large. Otherwise, we have the... https://escholarship.org/uc/item/7rj92442 Fri, 8 Nov 2002 00:00:00 +0000 Baucells, Manel Sarin, Rakesh K. https://escholarship.org/uc/item/41z1n2gn <p>We consider a decision problem where a group of individuals evaluates multi-attribute alternatives. We explore the minimal required agreements that are sufficient to specify the group utility function. A surprising result is that, under some conditions, a bilateral agreement among pairs of individuals on a single attribute is sufficient to derive the multi-attribute group utility. The bilateral agreement between a pair of individuals could be on the weight of an attribute, on an attribute evaluation function, or on willingness to pay. We investigate cases in which each individual's utility function is either additive or multiplicative. In the additive case, the group utility can be represented as the weighted sum of group attribute weights and group attribute evaluation functions. In the multiplicative case, the group utility takes a more complex form.</p> https://escholarship.org/uc/item/41z1n2gn Fri, 8 Nov 2002 00:00:00 +0000 Baucells, Manel Sarin, Rakesh K. https://escholarship.org/uc/item/3714w3t2 <p>Computational methods in support of decision-making have grown greatly in power during recent decades owing in large measure to Moore's Law. Nothing like this law operates in the realm of mathematical models, which has led to an increasingly lopsided “mind share” in favor of computation at the expense of mathematics among decision support system developers. The increased emphasis on computational methods is a mixed blessing, for these seldom excel at revealing why the solutions they yield are what they are. Yet in many situations, decision makers and policy makers need to understand the why behind these solutions in order to convince themselves and others of the need for action or to deepen their own understanding of the system under study. This paper advocates, with two detailed illustrations, conceptually simple models, arguments, and spreadsheets as adjuncts to complex computational models to help explain important aggregate properties of detailed computational solutions.... https://escholarship.org/uc/item/3714w3t2 Fri, 8 Nov 2002 00:00:00 +0000 Geoffrion, Arthur