2016 INFORMS Annual Meeting Program

497 / 561

INFORMS Nashville – 2016
497
2 - The Impact Of Dependence On Unobservable Queues
Jamol Pender, Cornell University,
In unobservable queueing systems, customers may choose to leave by balking,
which is based on the queue length or they may leave by reneging from the
queue, which is based on the virtual waiting time. The current literature assumes
that the sequences of balking and reneging random variables are independent and
a customer’s decision to join the line is independent of the their willingness to
wait. Thus, we relax the independence assumption and assess the impact of
dependence. We show that the joint density near the origin and not the
correlation of the balking and reneging random variables describes the impact of
the dependence for the queue length and workload processes.
3 - Service Systems With Correlated Service And Patience Times
Chenguang Wu, Northwestern University,
In most of the literature on service systems, a customer’s patience time is typically
assumed to be independent of her service time. However, in many settings one
expects a customer’s service and patience times to be related, as is empirically
reported in call centers and intensive care units. In our work we capture the
correlation in a many-server queuing model and explore the implications of the
correlation on capacity decisions to maximize profit. The profit in our case is the
difference between revenue generated by serving customers and personnel cost
associated with capacity. We demonstrate a nontrivial relation between capacity
and profit in a system with correlations.
4 - Service Systems With Slowdowns
Jing Dong, Northwestern University, ,
Pnina Feldman, Galit Yom-Tov
Many service systems exhibit service slowdowns when the system is congested.
In this project we investigate this phenomenon and its effect on system
performance. We modify the Erlang-A model to account for service slowdowns
and carry out the performance analysis in the heavy-traffic asymptotic regime.
We find that when the load sensitivity is high, the system can alternate randomly
between two performance regimes, a phenomenon which we refer to as bi-
stability. We analyze how the system parameters affect the bi-stability
phenomenon and propose an admission control policy to avoid the bad
performance regime.
WE41
207C-MCC
Topics in Portfolio Optimization
Sponsored: Financial Services
Sponsored Session
Chair: Brian Clark, Rensselaer Polytechnic Institute, Lally School of
Management, Troy, NY, 12180, United States,
1 - The Implicit Value Of Tracking The Market
Majeed Simaan, Rensselaer Polytechnic Institute, Troy, NY, 12180,
United States, , Chanaka Edirisinghe, Brian Clark
We find that the bias of the tracking error portfolio is mainly due to the mean-
variance portfolio rather than the tracking error component. We find that shifting
the weights of the portfolio toward the tracking error direction mitigates the
higher estimation error that originates in the mean vector. Using bootstrap
approach, we find that the committed estimation risk in the tracking error
portfolio is significantly lower than that committed in the mean-variance
portfolio. Additionally, this difference is amplified for cases that are associated
with greater estimation risk.
2 - Optimal Portfolio Rebalancing Under Mean-risk Tradeoff, Market
Impact, And Leverage
Jaehwan Jeong, Radford University, Department of Management,
P.O. Box 6954, Radford, VA, 24142, United States,
Chanaka Edirisinghe
A portfolio optimization problem is considered with frequent rebalancing, market
impact costs, and random returns, to determine the efficient frontier between the
Sharpe ratio and leverage ratio. Using an upper bound for portfolio variance, a
nonconvex separable quadratic optimization model with two quadratic
constraints is formulated. We develop an algorithm to solve this NP-hard problem
and provide a strategy analysis.
3 - Disentangle Signals And Noises In Portfolio Optimization
Long Zhao, University of Texas at Austin, Austin, TX,
United States, , Deepayan Chakrabarti,
Kumar Muthuraman
Mean-variance portfolios constructed using the sample mean and covariance
have a poor out-of-sample performance. There are two groups are better. The first
group shrinks the covariance. The second imposes norm-constraints. However,
the shrinkage targets and the norm-constraints are not validated. Our method
disentangles signals and noises in sample covariance matrix. By using signals and
bounding noises, this new method is parameter-free but can achieve significant
lower out-of-sample variance than the naive portfolios across ten datasets.
Finally, we show that the higher out-of-sample Sharpe ratio can be obtained by
cautiously using the information in sample mean.
WE42
207D-MCC
Strategic Behavior and Dynamic Choice in
Revenue Management
Sponsored: Revenue Management & Pricing
Sponsored Session
Chair: Jue Wang, Queen’s School of Business, 143 Union St. West,
Kingston, ON, K7L 3N6, Canada,
1 - To Ration Or Not To Ration? Selling To Strategic Customers Under
Shortage Effect.
Stephen Shum, City University of Hong Kong,
, Peng Hu, Hanqing Liu
We consider the dynamic pricing and rationing policy of a firm facing strategic
customers under the influence of shortage effect. We provide conditions under
which it is optimal for the firm to ration. We also identify the necessary and
sufficient conditions for the existence of steady state. We also characterize the
firm’s pricing and rationing policy under this steady state.
2 - Dynamic Pricing Of Vertically Differentiated Products For
Consumers With Sequential Search
Chi-Guhn Lee, University of Toronto, ,
Sajjad Najafi, Sami Najafi-Asadolahi, Steven Nahmias
We consider a firm that wishes to maximize the expected revenue from a line of
vertically differentiated products with fixed inventory over a finite horizon.
Consumers are utility maximizers and sequentially check the products for one
maximizing the utility. We analytically derive the optimal prices of products as
well as the optimal order of products’ presentation. We show that if the
reservation utility is stationary or increasing, it is optimal for the seller to present
the products in the descending order of quality and to increase price over time
under a certain condition.
3 - Competing With Responsive Follower: Imitator And
Strategic Consumers
Mike Mingcheng Wei, University at Buffalo,
In this work, we study the production and pricing decisions of a market leader
facing an imitator under strategic consumer behavior with possible network
externalities.
4 - Dynamic Pricing Of The Fixed-term Subscription Contract Offered
To The Strategic Customers
Roozbeh Yousefi, Smith School of Business, 143 Union St.,
Kingston, ON, K7L 3N6, Canada, ,
Yuri Levin, Mikhail Nediak, Jue Wang
Subscriptions are contracts that a company makes with its customers for regular
service delivery or for providing access to the service. Service access limits can be
stipulated in the subscription contract. We present a continuous time dynamic
pricing model for a monopolist offering a fixed term subscription contract without
per-use charges to strategic customers. We formulate the monopolist’s problem in
terms of optimal control, derive its optimality conditions, and study the structure
of the optimal solution. We also examine the stationary optimal pricing regime
and evaluate it in numerical experiments.
WE43
208A-MCC
Decision Analysis Arcade II
Sponsored: Decision Analysis
Sponsored Session
Chair: Alba Rojas, Virginia Tech, Progress Street, Blacksburg, VA,
24060, United States,
1 - Adaptive Clinical Trials And The Hot Stove Effect
Alba Rojas-Cordova, Virginia Tech, Blacksburg, VA, United States,
, Niyousha Hosseinichimeh
Adaptive clinical trials promise cost savings to the pharmaceutical industry and
have triggered significant regulatory changes. We model the dynamics of the drug
development decision within the context of adaptive clinical trials. We consider
the randomness surrounding the drug’s probability of technical success and the
bias inherent to its estimation. We show a bias against candidates that appear to
be worse than they actually are.
WE43