2015 Informs Annual Meeting

WC43

INFORMS Philadelphia – 2015

WC44 44-Room 103B, CC Contemporary Challenges in Pricing and Revenue Management: Repetitive Purchases and Loss Aversion Sponsor: Revenue Management and Pricing Sponsored Session Chair: Necati Tereyagoglu, Assistant Professor of Operations Management, Scheller College of Business, Georgia Institute of Technology, 800 W Peachtree St NW, Suite 4424, Atlanta, GA, 30308, United States of America, Necati.Tereyagoglu@scheller.gatech.edu 1 - Optimal Pricing of Access and Secondary Goods with Repeat Purchases: Evidence from Online Grocery Ricard Gil, Associate Professor, ricard.gil@jhu.edu, Evsen Korkmaz, Ozge Sahin We investigate optimal pricing strategies for an online grocery retailer who derives its profits from delivery fees and grocery sales. We derive testable theoretical implications that we take to data using a unique dataset detailing transaction information from an online grocery retailer in a Western European country. We find that firms may increase profits by implementing alternative and simpler pricing strategies that combine second and third degree price discrimination schemes. 2 - Loss Aversion and the Uniform Pricing Puzzle for Vertically Differentiated Products Javad Nasiry, Assistant Professor, Hong Kong University of Science and Technology, ISOM, LSK Building, HKUST, Hong Kong, Hong Kong - PRC, nasiry@ust.hk, Pascal Courty The uniform pricing puzzle states that a monopolist sells high and low quality products at the same price despite the fact that quality is perfectly observable and that there are no significant costs of adjusting prices. We resolve the puzzle by accounting for consumer loss aversion in monetary and consumption utilities and by assuming that the reference point is endogenously set as part of a “personal equilibrium” and includes only past purchases of products of the same quality. 3 - Service Pricing with Loss Averse Customers We consider a service system in which customers are loss averse towards both price and delay attributes. We first study customers’ equilibrium queueing strategies. We find that, in contrast to the traditional case in which loss aversion is not considered, there could exist three equilibrium strategies,. We then study the optimal pricing problem for a monopoly server. We show that loss aversion polarizes queues, making long queues even longer and short queues even shorter. 4 - Multi-Attribute Loss Aversion and Reference Dependence: Evidence from Performing Arts Industry Necati Tereyagoglu, Assistant Professor of Operations Management, Scheller College of Business, Georgia Institute of Liu Yang, Tsinghua University, School of Economics and Management, Tsinghua university, Beijing, 100084, China, yangliu@sem.tsinghua.edu.cn, Pengfei Guo, Yulan Wang We hypothesize that not only the price but also the observed sales for a seating area determines the utility of a customer from buying a ticket for a show in this industry. We test the reference effects for both prices and sales using customer level transaction data from an orchestra in the US, and show that patron decisions are driven by the position of the seating alternatives relative to price and sales expectations. We find that the revenue effects of referencing are significant. WC45 45-Room 103C, CC Sustainability II Contributed Session Chair: Xu Chang-yan, Shanghai Maritime University, 1550 Haigang Avenue, Shanghai, 201306, China, silu369@126.com 1 - Including Regeneration Possibilities to Increase Water Reuse in Scheduling Multipurpose Batch Plants Renzo Akkerman, Technische Universität Mönchen, TUM School of Management, Arcisstr 21, Mönchen, 80333, Germany, renzo.akkerman@tum.de, Pulluru Sai Jishna Scheduling of multipurpose batch process plants has recently started integrating water reuse objectives, also including water regeneration processes. Including regeneration possibilities significantly alters the flexibility of schedules that are Technology, 800 W Peachtree St. NW, Suite 4424, Atlanta, GA, 30308, United States of America, Necati.Tereyagoglu@scheller.gatech.edu, Peter Fader, Senthil Veeraraghavan

3 - Adaptive Robust Optimization of Surgery and Downstream Capacity Planning Saba Neyshabouri, PhD Student, George Mason University, SEOR Department, Engr Bldg, Rm 2100, MS, Fairfax, VA, 22030, United States of America, sneyshab@gmu.edu, Bjorn Berg We propose a novel robust optimization formulation to address the uncertainty in surgery duration and length-of-stay (LOS) in the downstream unit. The structure of the problem is analyzed in order to adapt a column-and-constraint generation method to find the optimal solution to the formulation. The methodology presented can be used in other important applications such as resource- constrained project scheduling under activity duration uncertainty and inventory management. 4 - Multi-class, Multi-resource Advance Scheduling with No-shows, Cancellations and Overbooking Mahshid Parizi, University of Washington, Industrial & Systems Engineering, University of Washington Box 352650, Seattle, United States of America, msalemip@uw.edu, Archis Ghate We study a scheduling problem where arriving stochastic demand of heterogeneous job-types is booked into the booking horizon or is rejected. The effect of cancellations, no shows and overbooking is included. Scheduling decisions must respect multiple resource constraints. We formulate an MDP model and provide an approximate dynamic programming algorithm rooted in Lagrangian relaxation, value function approximation and constraint generation. The resulting policies are compared with a myopic one. Chair: Pnina Feldman, UC Berkeley Haas School of Business, 2220 Piedmont Ave, Berkeley, CA, 94720, United States of America, feldman@haas.berkeley.edu 1 - Unbundling of Ancillary Service: How Does Price Discrimination of Main Service Matter? Yao Cui, Cornell University, 401N Sage Hall, Ithaca, United States of America, yao.cui@cornell.edu, Izak Duenyas, Ozge Sahin We consider a setting where the firm sells a main service (e.g., air travel) and an ancillary service (e.g., baggage delivery) to multiple consumer segments (e.g., business travelers and leisure travelers). We study how the firm’s ability to charge discriminatory main service prices affects its decision of whether to unbundle the ancillary service from the main service and charge separate prices. 2 - Dynamic Pricing in the Presence of Social Learning and Strategic Consumers Yiangos Papanastasiou, Haas School of Business, UC Berkeley, Berkeley, CA, 94720, United States of America, yiangos@haas.berkeley.edu, Nicos Savva When a product of unknown quality is first introduced, consumers may choose to strategically delay their purchasing decisions in order to learn from the reviews of their peers (social learning). This paper investigates how the presence of social learning affects the strategic interaction between a dynamic-pricing monopolist and a forward-looking consumer population. 3 - Innovative Dynamic Pricing: The Potential Benefits of Early-purchase Reward Programs Yossi Aviv, Professor, Washington University, 1 Brookings Drive, St. Louis, MO, 63130, United States of America, aviv@wustl.edu, Mike Wei The management science literature has studied on the implications of strategic consumer behavior on the effectiveness of dynamic pricing strategies. Possible ways to mitigate the adverse effect of strategic consumer behavior include price commitment, inter-temporal price matching, and capacity rationing. In this work, we propose a scientific model to theoretically examine the optimal structure and effectiveness of an early-purchase reward program as a mechanism for mitigating strategic behavior. 4 - The Operational Advantages of Threshold Discounting Offers Simone Marinesi, Wharton, 562 Jon M. Huntsman Hall, 3730 Walnut St, Philadelphia, PA, 19104, United States of America, marinesi@wharton.upenn.edu Inspired by Groupon, this study examines how Threshold-Discounting strategies–the idea to offer a discounted service to customers conditional on enough customers subscribing to the offer–can significantly boost operational performance and profit by improving capacity utilization. However, when offered through powerful intermediaries, such offers can be much less effective and even harmful. Surprisingly, in this context, we show that customer strategic behavior is beneficial to the firm. WC43 43-Room 103A, CC Innovative Pricing Strategies Sponsor: Revenue Management and Pricing Sponsored Session

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