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Full-Text Articles in Other Economics

Cooperative Cashing? An Economic Analysis Of Document Duplication In Cooperati4ve Web Caching, Kartik Hosanagar, Yong Tan Jun 2012

Cooperative Cashing? An Economic Analysis Of Document Duplication In Cooperati4ve Web Caching, Kartik Hosanagar, Yong Tan

Operations, Information and Decisions Papers

Cooperative caching is a popular mechanism to allow an array of distributed caches to cooperate and serve each others’ Web requests. Controlling duplication of documents across cooperating caches is a challenging problem faced by cache managers. In this paper, we study the economics of document duplication in strategic and nonstrategic settings. We have three primary findings. First, we find that the optimum level of duplication at a cache is nondecreasing in intercache latency, cache size, and extent of request locality. Second, in situations in which cache peering spans organizations, we find that the interaction between caches is a game of ...


Price Discrimination In Service Industries, Anja Lambrecht, Katja Seim, Naufel Vilcassim, Amar Cheema, Yuxin Chen, Gregory S. Crawford, Kartik Hosanagar, Raghuram Iyengar, Oded Koenigsberg, Robin Lee, Eugenio J. Miravete, Ozge Sahin Jun 2012

Price Discrimination In Service Industries, Anja Lambrecht, Katja Seim, Naufel Vilcassim, Amar Cheema, Yuxin Chen, Gregory S. Crawford, Kartik Hosanagar, Raghuram Iyengar, Oded Koenigsberg, Robin Lee, Eugenio J. Miravete, Ozge Sahin

Operations, Information and Decisions Papers

This article outlines recent methods and applications directed at understanding the profit and consumer welfare implications of increasingly prevalent price discrimination strategies in the service sector. These industries are typically characterized by heterogeneity in consumers’ valuation and usage of the service, resale constraints, and a focus on price as the service’s key attribute. The article focuses on how firms use nonlinear pricing or bundling strategies to benefit from the heterogeneity in consumer demand. We describe the basic economic model commonly used in the literature to analyze such strategic choices and present recent methodological improvements to this benchmark. A discussion ...


Product Performance Based Business Models: A Service Based Perspective, Morris. A. Cohen Jan 2012

Product Performance Based Business Models: A Service Based Perspective, Morris. A. Cohen

Operations, Information and Decisions Papers

The migration to a service based economy has led many firms to emphasize the service component of their product offerings. This shift has led to the emergence of a business model based on value creation through product utilization, where products are sold as a service, (often referred to as "Servicization" or product-service systems) The Servicization business model can be applied to both tangible and intangible, information intensive, products and is based on aligning customer and supplier incentives.A shift to a service based model leads to a variety of managerial questions that concern performance metrics, customer supplier relationships and contracting ...


Is Imprecise Knowledge Better Than Conflicting Expertise? Evidence From Insurers’ Decisions In The United States, Laure Cabantous, Denis Hilton, Howard Kunreuther, Erwann Michel-Kerjan Jun 2011

Is Imprecise Knowledge Better Than Conflicting Expertise? Evidence From Insurers’ Decisions In The United States, Laure Cabantous, Denis Hilton, Howard Kunreuther, Erwann Michel-Kerjan

Operations, Information and Decisions Papers

This paper reports the results of the first experiment in the United States designed to distinguish between two sources of ambiguity: imprecise ambiguity (expert groups agree on a range of probability, but not on any point estimate) versus conflict ambiguity (each expert group provides a precise probability estimate which differs from one group to another). The specific context is whether risk professionals (here, insurers) behave differently under risk (when probability is well-specified) and different types of ambiguity in pricing catastrophic risks (floods and hurricanes) and non-catastrophic risks (house fires). The data show that insurers charge higher premiums when faced with ...


Is Tiger Woods Loss Averse? Persistent Bias In The Face Of Experience, Competition, And High Stakes, Devin G. Pope, Maurice E Schweitzer Feb 2011

Is Tiger Woods Loss Averse? Persistent Bias In The Face Of Experience, Competition, And High Stakes, Devin G. Pope, Maurice E Schweitzer

Operations, Information and Decisions Papers

Although experimental studies have documented systematic decision errors, many leading scholars believe that experience, competition, and large stakes will reliably extinguish biases. We test for the presence of a fundamental bias, loss aversion, in a high-stakes context: professional golfers' performance on the PGA Tour. Golf provides a natural setting to test for loss aversion because golfers are rewarded for the total number of strokes they take during a tournament, yet each individual hole has a salient reference point, par. We analyze over 2.5 million putts using precise laser measurements and find evidence that even the best golfers—including Tiger ...


Technical Note—Robust Newsvendor Competition Under Asymmetric Information, Houyuan Jiang, Serguei Netessine, Sergei Savin Jan 2011

Technical Note—Robust Newsvendor Competition Under Asymmetric Information, Houyuan Jiang, Serguei Netessine, Sergei Savin

Operations, Information and Decisions Papers

We generalize analysis of competition among newsvendors to a setting in which competitors possess asymmetric information about future demand realizations, and this information is limited to knowledge of the support of demand distribution. In such a setting, traditional expectation-based optimization criteria are not adequate, and therefore we focus on the alternative criterion used in the robust optimization literature: the absolute regret minimization. We show existence and derive closed-form expressions for the robust optimization Nash equilibrium solution for a game with an arbitrary number of players. This solution allows us to gain insight into the nature of robust asymmetric newsvendor competition ...


Fostering Ipv6 Migration Through Network Quality Differentials, Guerin Roch, Kartik Hosanagar Jul 2010

Fostering Ipv6 Migration Through Network Quality Differentials, Guerin Roch, Kartik Hosanagar

Operations, Information and Decisions Papers

Although IPv6 has been the next generation Internet protocol for nearly 15 years, new evidences indicate that transitioning from IPv4 to IPv6 is about to become a more pressing issue. This paper attempts to quantify if and how such a transition may unfold. The focus is on "connectivity quality," e.g., as measured by users' experience when accessing content, as a possible incentive (or disincentive) for migrating to IPv6, and on "translation costs" (between IPv6 and IPv4) that Internet Service Providers will incur during this transition. The paper develops a simple model that captures some of the underlying interactions, and ...


Peer-Induced Fairness In Games, Teck-Hua Ho, Xuanming Su Dec 2009

Peer-Induced Fairness In Games, Teck-Hua Ho, Xuanming Su

Operations, Information and Decisions Papers

People exhibit peer-induced fairness concerns when they look to their peers as a reference to evaluate their endowments. We analyze two independent ultimatum games played sequentially by a leader and two followers. With peer-induced fairness, the second follower is averse to receiving less than the first follower. Using laboratory experimental data, we estimate that peer-induced fairness between followers is two times stronger than distributional fairness between leader and follower. Allowing for heterogeneity, we find that 50 percent of subjects are fairness-minded. We discuss how peer-induced fairness might limit price discrimination, account for low variability in CEO compensation, and explain pattern ...


Group Cooperation Under Uncertainty, Min Gong, Joanne Baron, Howard Kunreuther Dec 2009

Group Cooperation Under Uncertainty, Min Gong, Joanne Baron, Howard Kunreuther

Operations, Information and Decisions Papers

Previous research has shown an ‘interindividual-intergroup discontinuity effect’: intergroup interactions generally lead to less cooperative outcomes than interindividual interactions. We replicate the discontinuity effect in the deterministic prisoner’s dilemma, but find that groups are more cooperative than individuals in a stochastic version of the game. Three major factors that underlie the usual discontinuity effect are reduced in the stochastic environment: greed, fear, and persuasion power. Two group mechanisms are proposed to explain the reversed discontinuity effect: the motivation to avoid guilt and blame when making decisions that affect others’ welfare, and the social pressure to conform to certain norms ...


Dynamic Pricing Without Knowing The Demand Function: Risk Bounds And Near-Optimal Algorithms, Omar Besbes, Assaf Zeevi Nov 2009

Dynamic Pricing Without Knowing The Demand Function: Risk Bounds And Near-Optimal Algorithms, Omar Besbes, Assaf Zeevi

Operations, Information and Decisions Papers

We consider a single-product revenue management problem where, given an initial inventory, the objective is to dynamically adjust prices over a finite sales horizon to maximize expected revenues. Realized demand is observed over time, but the underlying functional relationship between price and mean demand rate that governs these observations (otherwise known as the demand function or demand curve) is not known. We consider two instances of this problem: (i) a setting where the demand function is assumed to belong to a known parametric family with unknown parameter values; and (ii) a setting where the demand function is assumed to belong ...


Economic Analysis Of Simulation Selection Problems, Stephen. E. Chick, Noah Gans Mar 2009

Economic Analysis Of Simulation Selection Problems, Stephen. E. Chick, Noah Gans

Operations, Information and Decisions Papers

Ranking and selection procedures are standard methods for selecting the best of a finite number of simulated design alternatives based on a desired level of statistical evidence for correct selection. But the link between statistical significance and financial significance is indirect, and there has been little or no research into it. This paper presents a new approach to the simulation selection problem, one that maximizes the expected net present value of decisions made when using stochastic simulation. We provide a framework for answering these managerial questions: When does a proposed system design, whose performance is unknown, merit the time and ...


Joining Longer Queues: Information Externalities In Queue Choice, Senthil K. Veeraraghavan, Laurens Debo Jan 2009

Joining Longer Queues: Information Externalities In Queue Choice, Senthil K. Veeraraghavan, Laurens Debo

Operations, Information and Decisions Papers

A classic example that illustrates how observed customer behavior impacts other customers' decisions is the selection of a restaurant whose quality is uncertain. Customers often choose the busier restaurant, inferring that other customers in that restaurant know something that they do not. In an environment with random arrival and service times, customer behavior is reflected in the lengths of the queues that form at the individual servers. Therefore, queue lengths could signal two factors—potentially higher arrivals to the server or potentially slower service at the server. In this paper, we focus on both factors when customers' waiting costs are ...


Self-Protection And Insurance With Interdependencies, Alexander Muermann, Howard Kunreuther Apr 2008

Self-Protection And Insurance With Interdependencies, Alexander Muermann, Howard Kunreuther

Operations, Information and Decisions Papers

We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles or selling “at-fault” insurance can partially internalize this externality and thereby improve individual and social welfare.


Customized Bundle Pricing For Information Goods: A Nonlinear Mixed-Integer Programming Approach, Shin-Yi Wu, Lorin. M. Hitt, Pei-Yu Chen, G. Anand Anandalingan Mar 2008

Customized Bundle Pricing For Information Goods: A Nonlinear Mixed-Integer Programming Approach, Shin-Yi Wu, Lorin. M. Hitt, Pei-Yu Chen, G. Anand Anandalingan

Operations, Information and Decisions Papers

This paper proposes using nonlinear mixed-integer programming to solve the customized bundle-pricing problem in which consumers are allowed to choose up to N goods out of a larger pool of J goods. Prior work has suggested that this mechanism has attractive features for the pricing of information and other low-marginal cost goods. Although closed-form solutions exist for this problem for certain cases of consumer preferences, many interesting scenarios cannot be easily handled without a numerical solution procedure. In this paper, we investigate the efficiency gains created by customized bundling over the alternatives of pure bundling or individual sale under different ...


Theories Of Commitment, Altruism And Reciprocity: Evidence From Linear Public Goods Games, Rachel Croson Apr 2007

Theories Of Commitment, Altruism And Reciprocity: Evidence From Linear Public Goods Games, Rachel Croson

Operations, Information and Decisions Papers

Theories of commitment, altruism, and reciprocity have been invoked to explain and describe behavior in public goods and social dilemma situations. Commitment has been used to explain behaviors like water conservation and voting. Altruism has been applied to explain contributions to charities and intergenerational transfers and bequests. Reciprocity has been invoked to explain gift exchange and labor market decisions. This paper describes a set of experiments, which distinguish between these competing theories by testing their comparative statics predictions in a linear public goods setting. Results provide strong support for reciprocity theories over either theories of commitment or of altruism.



In Search Of The Bullwhip Effect, Gerard. P. Cachon, Taylor Randall, Glen M. Schmidt Jan 2007

In Search Of The Bullwhip Effect, Gerard. P. Cachon, Taylor Randall, Glen M. Schmidt

Operations, Information and Decisions Papers

The bullwhip effect is the phenomenon of increasing demand variability in the supply chain from downstream echelons (retail) to upstream echelons (manufacturing). The objective of this study is to document the strength of the bullwhip effect in industry-level U.S. data. In particular, we say an industry exhibits the bullwhip effect if the variance of the inflow of material to the industry (what macroeconomists often refer to as the variance of an industry's “production”) is greater than the variance of the industry's sales. We find that wholesale industries exhibit a bullwhip effect, but retail industries generally do not ...


Product Line Design And Production Technology, Serguei Netessine, Terry A. Taylor Jan 2007

Product Line Design And Production Technology, Serguei Netessine, Terry A. Taylor

Operations, Information and Decisions Papers

In this paper we characterize the impact of production technology on the optimal product line design. We analyze a problem in which a manufacturer segments the market on quality attributes and offers products that are partial substitutes. Because consumers self-select from the product line, product cannibalization is an issue. In addition, the manufacturer sets a production schedule in order to balance production setups with accumulation of inventories in the presence of economies of scale. We show that simultaneous optimization of the product line design and production schedule leads to insights that differ significantly from the common intuition and assertions in ...


Supermodularity And Tipping, Geoffrey Heal, Howard Kunreuther Jun 2006

Supermodularity And Tipping, Geoffrey Heal, Howard Kunreuther

Operations, Information and Decisions Papers

We model tipping as a game-theoretic phenomenon and investigate the connection between supermodular games, tipping of equilibria and cascading, and apply the results to issues that arise in the context of homeland security and computer security. We show that tipping and cascading can occur in supermodular games and that "increasing differences"is a sufficient condition for tipping. Supermodularity and tipping of equilibria are closely related. We relate our results to Schelling’s early work on tipping.


Bundling With Customer Self-Selection: A Simple Approach To Bundling Low-Marginal-Cost Goods, Lorin. M. Hitt, Pei-Yu Chen Oct 2005

Bundling With Customer Self-Selection: A Simple Approach To Bundling Low-Marginal-Cost Goods, Lorin. M. Hitt, Pei-Yu Chen

Operations, Information and Decisions Papers

With declining costs of distributing digital products comes renewed interest in strategies for pricing goods with low marginal costs. In this paper, we evaluate customized bundling, a pricing strategy that gives consumers the right to choose up to a quantity M of goods drawn from a larger pool of N different goods for a fixed price. We show that the complex mixed-bundle problem can be reduced to the customized-bundle problem under some commonly used assumptions. We also show that, for a monopoly seller of low marginal cost goods, this strategy outperforms individual selling (M = 1) and pure bundling (M = N ...


Reciprocity, Matching And Conditional Cooperation In Two Public Goods Games, Rachel Croson, Enrique Fatas, Tibor Neugebauer Apr 2005

Reciprocity, Matching And Conditional Cooperation In Two Public Goods Games, Rachel Croson, Enrique Fatas, Tibor Neugebauer

Operations, Information and Decisions Papers

Experimental and empirical evidence identifies social preferences and proposes competing models of such preferences. We find that participants match the contributions of others in the voluntary contribution mechanism (VCM). We also examine a game with different equilibria, the weakest link mechanism (WLM). Here, in contrast, participants match the minimum contribution of others.


Optimal Product Launch Times In A Duopoly: Balancing Life-Cycle Revenues With Product Cost, Sergei Savin, Christian Terwiesch Jan 2005

Optimal Product Launch Times In A Duopoly: Balancing Life-Cycle Revenues With Product Cost, Sergei Savin, Christian Terwiesch

Operations, Information and Decisions Papers

We present a model describing the demand dynamics of two new products competing for a limited target market. The demand trajectories of the two products are driven by a market saturation effect and an imitation effect reflecting the product experience of previous adopters. In this general setting, we provide analytical results for the sales trajectories and life-cycle sales of the competing products. We use these results to study the impact of launch time on overall life-cycle sales. We consider the perspective of one of the competing products and model the trade-off between the lost revenues resulting from a delayed launch ...


Retail Assortment Planning In The Presence Of Consumer Search, Gerard. P. Cachon, Christian Terwiesch, Yi Xu Jan 2005

Retail Assortment Planning In The Presence Of Consumer Search, Gerard. P. Cachon, Christian Terwiesch, Yi Xu

Operations, Information and Decisions Papers

Consumers often know what kind of product they wish to purchase, but do not know which specific variant best fits their needs. As a result, a consumer may find an acceptable product in one retailer but nevertheless purchase nothing, opting to search other retailers for an even better product. We study several models of retail assortment planning, some of which explicitly account for consumer search and one that does not, which we call the “no-search” model. Even though the no-search model never includes an unprofitable variant in the assortment, in the presence of consumer search, it may indeed be optimal ...


Understanding Under - And Over - Reaction, Cade Massey, George Wu Feb 2003

Understanding Under - And Over - Reaction, Cade Massey, George Wu

Operations, Information and Decisions Papers

No abstract provided.


Demand And Supply Dynamics For Sequentially Released Products In International Markets: The Case Of Motion Pictures, Anita Elberse, Jehoshua Eliashberg Jan 2003

Demand And Supply Dynamics For Sequentially Released Products In International Markets: The Case Of Motion Pictures, Anita Elberse, Jehoshua Eliashberg

Operations, Information and Decisions Papers

We develop an econometric model to study a setting in which a new product is launched first in its domestic market and only at a later stage in foreign markets, and where the product's performance (“demand”) and availability (“supply”) are highly interdependent over time within and across markets. Integrating literature on international diffusion, “success-breeds-success” trends, and the theatrical motion picture industry—the focus of the empirical analysis—we develop a dynamic simultanenous-equations model of the drivers and interrelationship of the behavior of consumers (“audiences”) and retailers (“exhibitors”). Our findings emphasize the importance of considering the endogeneity and simultaneity of ...


Competition And Outsourcing With Scale Economies, Gerard. P. Cachon, Patrick T. Harker Oct 2002

Competition And Outsourcing With Scale Economies, Gerard. P. Cachon, Patrick T. Harker

Operations, Information and Decisions Papers

Scale economies are commonplace in operations, yet because of analytical challenges, relatively little is known about how firms should compete in their presence. This paper presents a model of competition between two firms that face scale economies; (i.e., each firm's cost per unit of demand is decreasing in demand). A general framework is used, which incorporates competition between two service providers with price- and time-sensitive demand (a queuing game), and competition between two retailers with fixed-ordering costs and pricesensitive consumers (an Economic Order Quantity game). Reasonably general conditions are provided under which there exists at most one equilibrium ...


Price Dispersion And Differentiation In Online Travel: An Empirical Investigation, Eric. K. Clemons, Ll-Horn Hann, Lorin. M. Hitt Apr 2002

Price Dispersion And Differentiation In Online Travel: An Empirical Investigation, Eric. K. Clemons, Ll-Horn Hann, Lorin. M. Hitt

Operations, Information and Decisions Papers

Previous research has examined whether price dispersion exists in theoretically highly efficient Internet markets. However, much of the previous work has been focused on industries with low cost and undifferentiated products. In this paper, we examine the presence of price dispersion and product differentiation using data on the airline ticket offerings of online travel agents (OTAs). We find that different OTAs offer tickets with substantially different prices and characteristics when given the same customer request. Some of this variation appears to be due to product differentiation—different OTAs specialize by systematically offering different trade-offs between ticket price and ticket quality ...


Flexible Service Capacity: Optimal Investment And The Impact Of Demand Correlation, Serguei Netessine, Gregory Dobson, Robert A. Shumsky Mar 2002

Flexible Service Capacity: Optimal Investment And The Impact Of Demand Correlation, Serguei Netessine, Gregory Dobson, Robert A. Shumsky

Operations, Information and Decisions Papers

We consider a firm that provides multiple services using both specialized and flexible capacity. The problem is formulated as a two-stage, single-period stochastic program. The firm invests in capacity before the actual demand is known and optimally assigns capacity to customers when demand is realized. Sample applications include a car rental company's use of mid-sized cars to satisfy unexpectedly high demand for compact cars and an airline's use of business-class seats to satisfy economy-class demand. We obtain an analytical solution for a particular case, when services may be upgraded by one class. The simple form of the solution ...


Experimental Results On Bargaining Under Alternatives Property Rights Regimes, Rachel Croson, John S. Johnstone Jan 2000

Experimental Results On Bargaining Under Alternatives Property Rights Regimes, Rachel Croson, John S. Johnstone

Operations, Information and Decisions Papers

The effect of alternative property rights regimes on the choice between taking an object and acquiring it via a consensual exchange is experimentally explored in a two-period screening game. Results are generally consistent with equilibrium predictions, suggesting that property rights regimes have a significant impact on observed behavior.


The Economics Of Yield-Driven Processes, Roger E. Bohn, Christian Terwiesch Dec 1999

The Economics Of Yield-Driven Processes, Roger E. Bohn, Christian Terwiesch

Operations, Information and Decisions Papers

The economic performance of many modern production processes is substantially influenced by process yields. Their first effect is on product cost — in some cases, low-yields can cause costs to double or worse. Yet measuring only costs can substantially underestimate the importance of yield improvement. We show that yields are especially important in periods of constrained capacity, such as new product ramp-up. Our analysis is illustrated with numerical examples taken from hard disk drive manufacturing. A three percentage point increase in yields can be worth about 6% of gross revenue and 17% of contribution. In fact, an eight percentage point improvement ...


Alternative Rebate Rules In The Provision Of A Threshold Public Good: An Experimental Investigation, Melanie Marks, Rachel Croson Feb 1998

Alternative Rebate Rules In The Provision Of A Threshold Public Good: An Experimental Investigation, Melanie Marks, Rachel Croson

Operations, Information and Decisions Papers

This study reports the effects of rebate rules on voluntary contributions to a threshold public good. Rebate rules specify how excess contributions, over the threshold amount are distributed. We examine three rebate rules experimentally: a no rebate policy where excess contributions are discarded, a proportional rebate policy where excess contributions are rebated proportionally to an individual's contribution, and a utilization rebate policy where excess contributions provide some continuous public good. Significantly more Nash equilibrium outcomes are observed under the no rebate treatment than under either of the other two. Interestingly, the variance of contributions differs significantly between rebate treatments.