2015 Informs Annual Meeting

TA47

INFORMS Philadelphia – 2015

TA45 45-Room 103C, CC Social Learning and Revenue Management Sponsor: Revenue Management and Pricing Sponsored Session Chair: Costis Maglaras, Columbia Business School, New York, NY, 10027, United States of America, c.maglaras@gsb.columbia.edu Co-Chair: Alireza Tahbaz-Salehi, Columbia Business School, 3022 Broadway, Uris Hall 418, New York, NY, 10023, United States of America, alirezat@columbia.edu 1 - Monopoly Pricing in the Presence of Social Learning Davide Crapis, Columbia Business School, 3022 Broadway, New York, NY, 10027, United States of America, dcrapis16@gsb.columbia.edu, Bar Ifrach, Costis Maglaras, Marco Scarsini A monopolist offers a product to a market of consumers with heterogeneous preferences. Consumers are uninformed about product quality and learn from reviews of others. First, we show that learning eventually occurs. Then, we characterize the learning trajectory via a mean-field approximation that highlights how the learning process depends on price and heterogeneity. Finally, we solve the pricing problem and show that policies that account for social learning increase revenues considerably. 2 - Networks, Shocks, and Systemic Risk Alireza Tahbaz-Salehi, Columbia Business School, 3022 Broadway, Uris Hall 418, New York, NY, 10023, United States of America, alirezat@columbia.edu, Daron Acemoglu, Asu Ozdaglar We develop a unified framework for the study of how network interactions can function as a mechanism for propagation and amplification of microeconomic shocks. The framework nests various classes of games over networks, models of macroeconomic risk originating from microeconomic shocks, and models of financial interactions. 3 - Market Entry under Competitive Learning Kimon Drakopoulos, kimondr@mit.edu, Asu Ozdaglar, Daron Acemoglu We consider a market entry game with two players, an incumbent and an entrant. The market can be of two types: (a)bad in which case the demand is fully elastic at a price \bar{p} or(b) good in which case there is a positive arrival rate of consumers who are willing to buy at higher prices. The entrant is learning the type of the market by observing the flow of payoffs.We prove that the problem has the structure of a war of attrition game and study its weak perfect Bayesian equilibria. 4 - Social Learning with Differentiated Products Arthur Campbell, Associate Professor, Yale University, School of Management, 135 Prospect Street, P.O. Box 208200, New Haven, CT, 06520-8200, United States of America, Arthur.Campbell@yale.edu This paper embeds social learning in a model of firms producing differentiated products. We consider how the structure of social relationships between consumers influence pricing and welfare. The model considers how a variety of characteristics of the social network influence these outcomes. It also serves to highlight the challenges one faces in using metrics such as consumer awareness and the sensitivity of demand to prices as measures of informational efficiency in markets. TA46 46-Room 104A, CC Empirical Research in Supply Chains and Service Management Sponsor: Manufacturing & Service Oper Mgmt/Service Operations Sponsored Session Chair: Marcelo Olivares, Assistant Professor, Universidad de Chile, Republica 701, Santiago, Chile, molivares@u.uchile.cl 1 - Estimating Customer Spillover Learning of Service Quality: A Bayesian Approach Andres Musalem, Universidad de Chile, Republica 701, Santiago, Chile, amusalem@duke.edu, Yan Shang, Jeannette Song We propose a Bayesian framework for estimating customer “spillover learning,” — the process by which customers’ learn from previous experiences of similar but not necessarily identical services. We apply our model to a data set containing shipping and sales historical records provided by a world-leading third-party logistics company.

2 - Spatial Competition and Preemptive Entry in the Discount Retail Industry Fanyin Zheng, Columbia Business School, 3022 Broadway, New York, NY, United States of America, fanyin.zheng@gmail.com I study the competitive store location decisions of discount retail chains in this paper. I model firms’ entry decisions using a dynamic duopoly location game and allow stores to compete over the shopping-dollars of close-by consumers. I use various economic modeling technics to make the model tractable and infer market divisions from data using a clustering algorithm. The empirical analysis suggests that dynamic competitive considerations are important in chain stores’ location decisions. 3 - Using Real-time Operational Data to Increase Labor Productivity in Retail Marcelo Olivares, Assistant Professor, Universidad de Chile, Republica 701, Santiago, Chile, molivares@u.uchile.cl We develop a methodology to re-assign sales employees across departments in a large retail store in order to improve productivity. Our method seeks to maximize the effectiveness of labor by allocating employees to departments that require inmediate assistance and where this assistance has a larger impact of sales. The method combines empirical methods to measure the impact of assistance and store operational data collected through video analytics to reassign employees in real-time. 4 - Consumer Search and the Structure of Personal Networks Raghuram Iyengar, Associate Professor, The Wharton School, University of Pennsylvania, 3730 Walnut Street Suite 700, Philadelphia, PA, 19104, United States of America, riyengar@wharton.upenn.edu We study how consumers’ information search for and purchase of new products are affected by structure of their personal network. To address threats to internal validity common in network studies, we conduct a randomized experiment in which we manipulate the similarity of preference among consumers and their network contacts. We estimate consumers’ utility function and determine how network antecedents moderate the weight on others’ information. TA47 47-Room 104B, CC Sustainability in Food Supply Chains Sponsor: Manufacturing & Service Oper Mgmt/Sustainable Operations Sponsored Session Chair: Erkut Sonmez, Assistant Professor, Boston College, 140 Commonwealth Ave, Fulton Hall, Chestnut Hill, MA, 02446, A. Serdar Simsek, Cornell ORIE, 282 Rhodes Hall, Ithaca, NY, 14853, United States of America, as2899@cornell.edu, Awi Federgruen, Upmanu Lall Contract farming sustains the operations of vulnerable farmers while better positioning the manufacturers to manage their supply risks. In this setting, a manufacturer who owns several production plants -each with a random demand for the crop- selects the set of farmers that minimizes her expected procurement and distribution costs before the growing season. We present two solution methods to this problem. We applied our model to a company contracting with hundreds of small farmers in India. 2 - Processed Produce: Introduction, Pricing, and Profit Orientation Omkar Palsule-desai, Faculty, Indian Institute of Management Indore, Rau Pithampur Road, Indore, India, omkardpd@iimahd.ernet.in, Muge Yayla-Kullu, Nagesh Gavirneni We examine product characteristics and market dynamics to identify conditions under which it is optimal to introduce the processed produce, and it should be managed by cooperatives instead of private firms. We develop a mathematical model capturing (i) competition between non-profit and for-profit firms, (ii) consumers’ valuation discount, and (iii) product perishability. We provide ample evidences to policy makers promoting processed products offered by cooperatives. 3 - Converting Retail Food Waste Into By-product Deishin Lee, Assistant Professor, Boston College, 140 Commonwealth Ave,, Fulton Hall 344, Chestnut Hill, MA, 02467, United States of America, deishin.lee@bc.edu, Mustafa Tongarlak By-product synergy (BPS) is a form of joint production that uses the waste stream from one (primary) process as useful input into another (secondary) process. We investigate how BPS can mitigate food waste in a retail grocer setting, and how it interacts with other mechanisms for reducing waste (i.e., waste disposal fee and tax credit for food donation). We derive the retailer’s optimal order policy under BPS, showing how it affects the amount of waste. United States of America, erkut.sonmez@bc.edu 1 - Supply Chain Analysis of Contract Farming

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