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Open Access Publications from the University of California

Interdisciplinary Studies in Operations Management

  • Author(s): An, Jaehyung
  • Advisor(s): Tang, Christopher
  • et al.

This dissertation consists of two chapters. The first is at the socially responsible operations in the agricultural sector of emerging economies. The agricultural sector in emerging markets accounts for a significant portion of economic activities even though most farmers are trapped in the poverty cycle owing to their smallholdings. Aggregating these farmers through formal or informal cooperatives (coops) can enable them to: (1) reduce production cost; (2) increase/stabilize process yield; (3) increase brand awareness; (4) eliminate unnecessary intermediaries; and (5) eliminate price uncertainty. To examine whether these effects will benefit the members of such aggregation when they compete with other individual farmers, we present separate models to capture the essence of these five effects. For each effect, we find that it is beneficial for a farmer to be part of the aggregation only when the size of the aggregation is below a certain threshold. Also, while certain effects are beneficial to the market as a whole, other effects are hurtful due to higher market price and/or lower production quantity.

The second chapter examines the price matching policy in the ocean freight industry. Ocean freight continues to play the most significant role in supporting material flows along global supply chains. In this industry, shippers (customers) can purchase freight services either directly from a carrier (service provider) in advance or through a freight forwarder (spot market) just before the departure of an ocean liner. To entice shippers to book directly from the carrier, we develop a new variant of basic price matching policy, so called "fractional price matching" where the carrier refund only a "fraction" of the price difference. By modeling the dynamics between the carrier and the shippers as a Stackelberg game, we show that the carrier can use the fractional price matching contract to generate a higher demand from the shippers by increasing the fraction in equilibrium. Also, there are multiple optimal regular prices and the optimal fraction that possess the following property: if the carrier increases the fraction, then the carrier should increase the regular price to compensate for bearing additional risk. More importantly, we find that the optimal fractional price matching contract is revenue neutral in the sense that it enables the carrier to obtain the same expected revenue as before (when there was no price matching). This result implies that the carrier can develop a menu of fractional price matching contracts that are revenue neutral, and let the shipper to choose a specific contract as desired.

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