Informs 2015

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INFORMS Philadelphia – 2015
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3 - Feed-in Tariff Versus Rebate for Renewable Generation
Ruben Lobel, Operations and Information Management
Department at The Wharton School of the University of
Pennsylvania, Jon M. Huntsman Hall 3730 Walnut Street, Office
568, Philadelphia, PA, 19104, United States of America,
, Vlad Babich
We compare two types of subsidies used to stimulate renewable energy
generation: a feed-in tariff and an upfront rebate. The former guarantees a steady
cash flow over the long term, while the latter reduces the upfront capital
requirement. We show how uncertainty and strategic customer behavior
determines policy efficiency.
4 - Energy Efficiency and Demand Response on a Production Line
Eric Webb, Graduate Student, Indiana University, 1309 E. 10th
Street, Bloomington, IN, 47405, United States of America,
Owen Wu
Demand response (DR) programs incentivize industrial firms to halt production
during times of peak electricity demand. We consider a firm faced with the option
of investing in energy efficiency (EE) improvements at individual machines on
the production line. When viewed in isolation, EE incentives may not be enough
to induce the firm to invest in the socially optimal level of EE, due to the loss of
DR revenue after installation. We suggest a new policy for EE incentives in light
of DR.
SC48
48-Room 105A, CC
Energy and Commodity Merchant Operations
Sponsor: Manufacturing & Service Oper Mgmt/iFORM
Sponsored Session
Chair: Nicola Secomandi, Associate Professor, Carnegie Mellon Tepper
School of Business, 5000 Forbes Avenue, Pittsburgh, PA, 15213,
United States of America,
Co-Chair: Selvaprabu Nadarajah, Assistant Professor Of Information
And Decision Sciences, College of Business, University of Illinois at
Chicago, 601 S Morgan Street, 24th Floor, Chicago, IL, 60607,
United States of America,
1 - Electricity Derivative Trading with Private Information on
Price Distributions
Eddie Anderson, University of Sydney, Business School, Sydney,
Australia, , Andy Philpott
When trading forward contracts, firms try to hedge risk, but at the same time
want to benefit from superior price forecasting. We model a negotiation between
generator and retailer on forward contracts when both have private information
on the probability of different price outcomes. Both firms submit a schedule of
prices and quantities, and the market clears. Can a firm gain by looking at the
offers that the other player makes in order to improve its own estimate of the real
probabilities?
2 - Optimal Production and Shortfall Hedging
Liao Wang, Department of Industrial Engineering and Operations
Research, Columbia University, S.W. Mudd Building, Room 315,
500 West 120th Street, New York, NY, 10027, United States of
America, , David D. Yao
Over a given time horizon, we study the one-time production quantity decision at
the beginning, and the real-time risk-hedging strategy throughout the horizon.
The objective is to minimize the shortfall from a given target profit, and we derive
the joint optimal solution to both production and hedging. In addition, we
characterize the efficient frontier, and quantify the improvement in risk-return
tradeoff achieved by the shortfall hedging.
3 - Least Squares Monte Carlo: Duality Perspective and Energy Real
Option Application
Selvaprabu Nadarajah, Assistant Professor Of Information And
Decision Sciences, College of Business, University of Illinois at
Chicago, 601 S Morgan Street, 24th Floor, Chicago, IL, 60607,
United States of America, , Nicola Secomandi
Least squares Monte Carlo (LSM) is a common approximate dynamic
programming approach. We provide a duality perspective on a version of this
approach, which leads to an equivalent formulation of this approach as a relaxed
approximate linear programming (ALP) model. We provide both theoretical and
numerical support for the use of LSM rather than ALP. Our numerical study deals
with merchant ethanol production, an important energy application.
SC49
49-Room 105B, CC
Operations Management and Marketing
Sponsor: Manufacturing & Service Oper Mgmt/Supply Chain
Sponsored Session
Chair: Xingwei Lu, University of Pennsylvania, The Wharton School,
Philadelphia, United States of America,
Co-Chair: Xuanming Su, The Wharton School, University of
Pennsylvania, Philadelphia, United States of America,
1 - A Tractable Discrete Choice Model - Beyond Logit
Aydin Alptekinoglu, Penn State, Smeal College of Business,
University Park, PA, 16802, United States of America,
, John Semple
We explore the mixed (random coefficients) and heteroscedastic versions of the
Exponomial Choice (EC) model. EC has attractive analytical features like closed-
form choice probabilities, logconcave likelihood, and more realistic cross-price
elasticities compared to multinomial logit. Allowing heteroscedasticity in error
terms, and allowing random coefficients with normal distribution, retain closed-
form choice probabilities but not some of the other properties.
2 - How Should a Retailer Share Demand Information
with the Supplier?
Qi Annabelle Feng, Professor, Purdue University,
100 S. Grant St., West Lafayette, IN, United States of America,
, J. George Shanthikumar
We consider a supplier selling through a retailer who possesses private demand
information. The retail can choose to share a Bayesian plausible demand signal
with the supplier. We define the notion of information accuracy and analyze the
structure of demand information to understand the retailer’s incentive of
information sharing and its effect on supply chain performance.
3 - Minimum Advertised Price Policy: Economic Analysis
and Implications
Ozge Sahin, Johns Hopkins University,
Liang Ding, Roman Kapuscinski
Manufacturers frequently use Minimum Advertised Price (MAP) to protect
retailers’ margin and to encourage them to exert more sales effort. This paper
analyzes the performance of MAP under various market situations and compares
it with another vertical price restraint policy – Resale Price Maintenance. Results
indicate that MAP could be beneficial to manufacturers and also to customers
when the information search is costly and the consumers are moderately
heterogeneous in their valuation.
4 - Revenue Management with Loyalty Programs
Xingwei Lu, University of Pennsylvania, The Wharton School,
Philadelphia, United States of America,
, Xuanming Su
We study loyalty programs in firms with limited capacity. Based on the classic
Littlewood’s model, our model additionally reserves some capacity for awards and
allows customers to choose between paying with cash and redeeming with points.
We investigate the optimal capacity allocations and compare program designs.
SC50
50-Room 106A, CC
Procurement and Management of Complex
Goods and Services
Sponsor: Manufacturing & Service Operations Management
Sponsored Session
Chair: Damian Beil, Associate Professor of Technology & Operations,
Ross School of Business, University of Michigan, 701 Tappan St,
Ann Arbor, MI, 48109, United States of America,
1 - Multi-channel Service with Heterogeneous Customers
Shiliang Cui, Georgetown University, McDonough School of
Business, Washington, DC, 20057, United States of America,
, Yong-Pin Zhou
When firms offer multiple service channels, it gives customers a chance to choose
the channel that better fits their need (cost, convenience, advice, etc.). On the
other hand, firms can also use carefully designed multiple service channels to
achieve customer segmentation. We study mechanisms to achieve this.
SC50