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INFORMS Nashville – 2016
198
4 - Leveraging The Common Input Data In Comparisons Of Systems
Under Input Uncertainty
Eunhye Song, Northwestern University, Evanston, IL, United
States,
eunhyesong2016@u.northwestern.edu,Barry L Nelson
This talk focuses on a discrete optimization via simulation problem when all
systems share the same input models estimated from common input data.
Standard methods that are conditional on the estimated input models may not
provide the target correct-selection inference, exposing the user to unmeasured
model risk. We define the common-input-data (CID) effect as the joint impact of
input uncertainty due to the common distribution on each system’s outputs. The
proposed procedure incorporates input uncertainty by leveraging the CID effect
and is proven to provide the desired inference asymptotically under mild
conditions.
MC46
209B-MCC
Revenue Management in e-Commerce
Sponsored: Revenue Management & Pricing
Sponsored Session
Chair: Joline Uichanco, University of Michigan, Ross School of
Business, Ann Arbor, MI, United States,
jolineu@umich.edu1 - Minimum Advertised Pricing Policy: An Economic Analysis
Ozge Sahin, Johns Hopkins University,
ozge.sahin@jhu.eduLiang Ding, Roman Kapuscinski
During last twenty years, many brick-and-mortar retailers face competition from
online retailers and local discounters. Customers are able to experience products
in a brick-and-mortar store but purchase online for lower prices. As a result,
brick-and-mortar retailers’ sales decrease and they stop promoting or carrying
such products. For manufacturers, however, brick-and-mortar retailers play a
crucial role by showcasing and advertising products to customers. In this paper,
we build a stylized model to study and compare the performance of common
price restraining policies.
2 - Omni-channel Revenue Management Through Pricing And
Fulfillment Planning
Joline Uichanco, University of Michigan, Ann Arbor, MI,
United States,
jolineu@umich.eduPavithra Harsha, Shivaram Subramanian
In an omni-channel environment, inventory is shared across channels through
multiple fulfillment options. We present a tractable optimization model to
determine optimal lifecycle channel prices, inventory allocations and partitions
across channels that maximizes the total chain level profit. This solution was
tested in a production pilot setting and demonstrated a 6% increase in markdown
revenue over current practices across the categories analyzed.
3 - Cash-on-delivery In Emerging Markets: An Empirical Study
Richard Zhiji Xu, Kellogg School of Management,
Northwestern University, Evanston, IL, United States,
zhiji-xu@kellogg.northwestern.edu,Antonio Moreno-Garcia,
Chaithanya Bandi
Cash-on-delivery (COD), the payment method where customers pay for the
products in cash at the time of delivery, is widely used in online retailing in
developing countries. Using a unique data set from a leading online fashion
retailer in India, we study the impacts of COD on pricing strategies, firm revenue,
and other operational consequences.
4 - Inventory Optimization For Fulfillment Integration In
Omnichannel Retailing
Aravind Govindarajan, University of Michigan, 701 Tappan Street,
Ann Arbor, MI, 48109, United States,
arav@umich.edu,
Amitabh Sinha, Joline Uichanco
Omnichannel refers to the seamless integration of a retailer’s channels such as
brick-and-mortar and e-commerce. Using analytical models, we study three basic
omnichannel fulfillment models varying in the level of integration between in-
store and online demands. We obtain optimal order-up-to quantities for the single
period, two-store problem, and extend our analyses to the multi-store setting,
developing an asymptotically optimal heuristic which provides significant cost
savings over current practice. We then numerically study the effects of cost and
demand parameters on the choice of fulfillment structures. Finally, we discuss
extensions to the multi-period setting under lost sales.
MC47
209C-MCC
New Revenue Management Practices in Airline and
Hotel Industries
Sponsored: Revenue Management & Pricing
Sponsored Session
Chair: Ovunc Yilmaz, University of South Carolina, Columbia, SC,
United States,
oyilmaz@email.sc.eduCo-Chair: Mark Ferguson, University of South Carolina, Columbia, SC,
United States,
mark.ferguson@moore.sc.edu1 - Dynamic Pricing With A Fare-lock Option
Zhi-Long Chen, University of Maryland, Robert H Smith School of
Business, Dept of Decision, Operations & Info Tech, College Park,
MD, 20742-1815, United States,
zchen@rhsmith.umd.eduMing Chen
We study a relatively new revenue management practice frequently seen in the
airlines industry where customers have the option to lock a fare at a small fee for
a certain period of time. The free 24 hour cancellation policy enforced by DOT
can be viewed as a special case of this problem. This provides a valuable option for
those undecided travelers when finalizing their travel plans. We investigate the
implications of such practice on both the airlines and the passengers, as well as
the resulting pricing policies.
2 - You Are Eligible For An Upgrade: A Critical Look At Hotel
Standby Upgrades
Ovunc Yilmaz, PhD Student, University of South Carolina,
Columbia, SC, United States,
oyilmaz@email.sc.eduMark Ferguson, Pelin Pekgun
Standby upgrades, where the guest is only charged if the upgrade is available at
the time of arrival, is one technique that has become increasingly popular in the
hotel industry. Working on a data set from a major hotel chain, we analyze the
guest decision-making process for these upgrades.
3 - The Rise Of The Sharing Economy: Estimating The Impact Of
Air BnB On The Hotel Industry
Davide Proserpio, Boston University,
dproserp@cs.bu.eduIn this paper we study Air BnB and its entry into the short-term accommodation
market in Texas. We first explore Air BnB’s impact on hotel room revenue, and
show that in Austin, where Air BnB supply is highest, the impact on hotel
revenue is in the 8-10% range; moreover, the impact is non-uniformly
distributed, with lower-priced hotels and those hotels not catering to business
travelers being the most affected. We then examine seasonal effects and provide
evidence that the flexibility of Airbnb supply impacts hotels disproportionately
during high season, limiting their pricing power.
4 - Price Volatility And Market Performance Measure:
The Case Of Revenue Managed Goods
Benny Mantin, University of Waterloo,
benny.mantin@uwaterloo.ca, Eran Rubin
The airline industry has embraced revenue management practices which are
manifested through frequent updates to posted airfares. When shopping for the
lowest available fare, consumers are exposed to volatile prices. Different routes
exhibit substantially different volatility levels of the lowest available fare. We
quantify the relation between these volatility levels and performance metrics such
as sales and revenue at the route level using US domestic aviation markets.
MC46