2016 INFORMS Annual Meeting Program

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INFORMS Nashville – 2016
27
SA31
SA29
202A-MCC
Dynamic Mechanism Design
Sponsored: Manufacturing & Service Oper Mgmt, Sustainable
Operations
Sponsored Session
Chair: Peng Sun, Duke University, Durham, NC, United States,
1 - Dynamic Mechanism Design With Budget Constrained Buyers
Under Limited Commitment
Omar Besbes, Columbia University, ,
Santiago Balseiro, Gabriel Weintraub
We study the dynamic mechanism design problem of a firm repeatedly selling
items to budget-constrained buyers when the seller has limited commitment
power. We argue that this problem is generally intractable. Thus motivated we
introduce a fluid model that allows for a tractable characterization of the optimal
mechanism. We leverage our characterization to provide insights into the
dynamic structure of the optimal mechanism and show that the proposed
mechanism is a good approximation in large markets.
2 - Dynamic Short-term Contracts Under Hidden Inventory
And Backlog
Hao Zhang, University of British Columbia, Vancouver, BC,
Canada,
Lifei Sheng, Mahesh Nagarajan
We study a supply chain consisting of a supplier and a retailer faced with random
demand over multiple periods. At the beginning of each period, the supplier
offers a one-period contract and the retailer chooses order quantity before the
demand is realized. The retailer carries leftover inventory or backlogs unmet
demand, which is unobservable by the supplier. We find that in the infinite-
horizon setting with exponentially distributed demand, for a large parameter set,
the optimal sequence of short-term contracts is a generalized base-stock policy,
where the base-stock level weakly increases with the beginning inventory.
3 - Dynamic Mechanism Design Without Money
Huseyin Gurkan, Duke University, Duke University, Durham, NC,
27707, United States, , Santiago
Balseiro, Peng Sun
We consider a principal repeatedly allocating a single resource in each period to
one of multiple agents without relying on monetary payments over an infinite
horizon. Agents’ private valuations are independent and identically distributed.
We show that as the discount factor approaches 1, the optimal dynamic
mechanism without money achieves the first-best allocation (the welfare
maximizing allocation when valuations are public). As part of the proof, we
provide an incentive compatible dynamic mechanism that asymptotically achieves
the first-best.
4 - Optimal Contract To Induce Continued Effort
Peng Sun, Duke University, Durham, NC, ,
Feng Tian
We consider a principal incentivizing an agent to exert effort in order to raise the
arrival rate of a Poisson process. The effort is costly to the agent, unobservable to
the principal, and affects the instantaneous arrival rate. Each arrival yields a
constant revenue to the principal. A contract involves payments and a potential
stopping time in order to motivate the agent to always exert effort. Although
payments can take general forms contingent upon past arrival times, the optimal
contract has a simple and intuitive structure, which depends on whether the
agent is less patient than the principal.
SA30
202B-MCC
Revenue Management: Algorithms and Applications
Sponsored: Manufacturing & Service Oper Mgmt
Sponsored Session
Chair: Retsef Levi, MIT, Cambridge, MA, United States,
1 - Assortment Optimization Under A Mallows Distribution
Over Permutations
Antoine Desir, Columbia University, 601 W 113th Street, Apt 3J,
New York, NY, 10025, United States,
Vineet Goyal, Srikanth Jagabathula, Danny Segev
We study assortment optimization under Mallows distribution over permutations
model that is specified by a central permutation and a decay parameter. The
probability of any permutation decays exponentially in the (Kendall-Tau) distance
from the central permutation. We present an efficient procedure to compute exact
choice probabilities for any assortment even with exponential size distribution.
Our procedure crucially exploits the symmetries of the Mallows model and leads
to a compact IP formulation for assortment optimization. We also give an efficient
near-optimal approximation for the IP.
2 - Auctions In The Online Display Advertising Chain:
A Case For Transparency
Amine Allouah, Columbia University, 520 W 122nd Street Apt 24,
New York, NY, 10027, United States,
Omar Besbes
In the online display advertising market in which auctions are run to sell
impressions in real time, advertisers most often bid for impressions through
intermediaries. We investigate the impact of the active role such intermediaries
take on the selling mechanism that sellers should use and on the performance
metrics of the different agents in the advertising chain.
3 - Fast Provably Near-optimal Algorithms For Dynamic
Assortment Optimization
Ali Aouad, Massachusetts Institute of Technology,
Retsef Levi, Danny Segev
We study the dynamic assortment planning problem, where the demand is
stochastic, and retailers’ decisions need to be robust (revenue-wise) to stock-out
events, elicited by the inventory limitations. While being key to revenue
management, particularly in retailing and airlines, the computational aspects of
such problems are still wide open. We devise the first efficient algorithms with
provable performance guarantees, under several common modeling primitives,
including the widespread Multinomial Logit choice model. In practical
comparisons against incumbent heuristics, our algorithms improve the revenue
by 9% to 35%, with better computational efficiency and robustness in most cases.
SA31
202C-MCC
Derivatives in the Operations/Finance Interface Area
Sponsored: Manufacturing & Service Oper Mgmt, iFORM
Sponsored Session
Chair: Arun Chockalingam, Eindhoven University of Technology, Den
Dolech 2, Eindhoven, 5612 AZ, Netherlands,
1 - The Optimal Hedging Strategy In A Competitive Supply Chain
With Substitutable Commodities
Ehsan Bolandifar, Chinese University of Hong Kong,
, Zhong Chen
This paper studies two risk-neutral processors procure two substitutable
commodities from spot markets to process and sell through a retailer. First, we
characterize the optimal index-based contracts for processors that indicates the
processor’s optimal contract consists of a processing margin which is independent
of its financial hedging decisions and a hedge ratio which is a function of
commodity price volatility. Next, we characterize conditions under which, the
retailer prefers to be exposed to commodity price risks. We show that processors
can benefit from market pricing, when these prices are linked to input commodity
prices and index-based contracts are a means to achieve it.
2 - Integrated Risk Management In Commodity Markets
Fehmi Tanrisever, Bilkent University,
In this paper, we examine the integrated operating and financial hedging
decisions of a value maximizing firm, in the presence of capital market
imperfections. Our results show that the working capital and the hedging polices
of the firm interact with each other in a multi-period dynamic inventory model.
In particular, looser working capital policies lead the managers to take relatively
more speculative positions in the market to maximize firm value.
3 - Production Planning With Shortfall Hedging Under Partial
Information And Budget Constraint
Liao Wang, Columbia University, ,
David D Yao
We study production planning integrated with risk hedging by considering
shortfall (from a pre-specified target) as the risk measure. The optimal hedging
strategy is identified via a dual lower-bound problem, and takes the form of a
digital option combined with a put option; and optimizing the production
quantity, given the optimal hedging, is shown to be a convex minimization
problem. With both production and hedging optimized, we provide a complete
characterization of the efficient frontier, and an explicit quantification of the
shortfall reduction achieved by hedging.