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Game Theory Applications in Socially Responsible Operations and Operations-Marketing Interface

  • Author(s): Liao, Chen-Nan
  • Advisor(s): Shen, Zuo-Jun
  • et al.
Abstract

This dissertation includes three chapters: (1) Farmers' Information Management in Developing Countries - A Highly Asymmetric Information Structure. (2) Information Provision Policies for Improving Farmer Welfare in Developing Countries: Heterogeneous Farmers and Market Selection. (3) Role of Exchangeable Tickets in the Optimal Menu Design for Airline Tickets.

The first chapter studies farmers' information management and utilization problems in developing countries. In these countries, governments, non-governmental organizations, and social entrepreneurs are disseminating agriculture information to farmers to improve their welfare. However, instead of having direct access to the information, farmers usually acquire information from local social networks, and, thus, they may have very different information channels. In this paper, we establish a general framework that accommodates highly asymmetric information structures to capture the fact that information is transmitted indirectly through the social network. In our model, a bipartite graph describes which subset of signals is accessible to a farmer. We characterize a unique Bayesian Nash equilibrium and express farmers' strategies and expected profits in closed forms. We discuss properties of this equilibrium and show that asymmetric information structures can lead to various novel results. We also conduct comprehensive studies on the equilibrium in the "weak signal limit", where signals are subject to substantial noise. We examine the government's optimal information allocation in this limit when its goal is to maximize (1) farmers' total profits or (2) the social welfare.

In the second chapter, we examine the impact of information provision policies on farmer welfare in developing countries where farmers lack relevant and timely information for making informed decisions regarding which crop to grow and which market to sell in. In addition to heterogeneous farmers, we consider the case when farmers are price takers and yet the price of each crop (or the price in each market) is a linearly decreasing function of the total sales quantity. When market information is offered free-of-charge, we show that: (a) providing information is always beneficial to farmers at the individual level; and (b) providing information to all farmers may not be welfare maximizing at the aggregate level. To maximize farmer welfare, it is optimal to provide information to a targeted group of farmers who are located far away from either market. However, to overcome perceived unfairness among farmers, we show that the government should provide information to all farmers at a nominal fee so that the farmers will adopt the intended optimal provision policy willingly. We extend our analysis to examine different issues including: precision of market information, and information dissemination via a for-profit company.

The third chapter examines the optimal menu design problem with three types of tickets: refundable, nonrefundable, and exchangeable tickets. We identify the role of exchangeable tickets in trapping consumers and show that for the seller, it is inherently more profitable than the other two types of tickets. On the other hand, increasing the flexibility of exchangeable tickets may dampen the seller's profitability. The analysis also reveals that cancellation fees are used as instruments to adjust the differences between consumers' willingness to pay, and when they are adopted, the seller has less incentive to sell nonrefundable tickets. Our results also explain why menu offerings, while prevalent in the airline industry, are so scant in commodity goods markets.

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