Knowledge that Transforms

We consider assortment optimization problems under the multinomial logit model, where the parameters of the choice model are random. The randomness in the choice model parameters is motivated by the fact that there are multiple customer segments, each with different preferences for the products, and the segment of each customer is unknown to the firm when the customer makes a purchase. This choice model is also called the mixture‐of‐logits model. The goal of the firm is to choose an assortment of products to offer that maximizes the expected revenue per customer, across all customer segments. We establish that the problem is NP complete even when there are just two customer segments. Motivated by this complexity result, we focus on assortments consisting of products with the highest revenues, which we refer to as revenue‐ordered assortments. We identify specially structured cases of the problem where revenue‐ordered assortments are optimal. When the randomness in the choice model parameters does not follow a special structure, we derive tight approximation guarantees for revenue‐ordered assortments. We extend our model to the multi‐period capacity allocation problem, and prove that, when restricted to the revenue‐ordered assortments, the mixture‐of‐logits model possesses the nesting‐by‐fare‐order property. This result implies that revenue‐ordered assortments can be incorporated into existing revenue management systems through nested protection levels. Numerical experiments show that revenue‐ordered assortments perform remarkably well, generally yielding profits that are within a fraction of a percent of the optimal.

This study empirically investigates consumer perceptions of remanufactured consumer products in closed‐loop supply chains. A multi‐study approach led to increasing levels of measure refinement and facilitated examination of various assumptions researchers have made about the consumer market for remanufactured products. Based in part on the measure building studies, an experimental study examined remanufactured product perceptions from a national panel of consumers. The consumers responded to remanufactured product descriptions that manipulated price discount and brand equity. The results indicate that discounting had a consistently positive, linear effect on remanufactured product attractiveness. Curiously, the brand equity manipulation proved less important to consumers than specific remanufactured product quality perceptions. The results also show that green consumers and consumers who consider remanufactured products green typically found remanufactured products significantly more attractive. Finally, the findings introduce the concept of negative attribute perceptions, such as disgust, that had a significantly detrimental effect on remanufactured product attractiveness.

Members of a supply chain often make profit comparisons. A retailer exhibits peer‐induced fairness concerns when his own profit is behind that of a peer retailer interacting with the same supplier. In addition, a retailer exhibits distributional fairness when his supplier's share of total profit is larger than his own. While existing research focuses exclusively on distributional fairness concerns, this study investigates how both types of fairness might interact and influence economic outcomes in a supply chain. We consider a one‐supplier and two‐retailer supply chain setting, and we show that (i) in the presence of distributional fairness alone, the wholesale price offer is lower than the standard wholesale price offer; (ii) in the presence of both types of fairness, the second wholesale price is higher than the first wholesale price; and (iii) in the presence of both types of fairness, the second retailer makes a lower profit and has a lower share of the total supply chain profit than the first retailer. We run controlled experiments with subjects motivated by substantial monetary incentives and show that subject behaviors are consistent with the model predictions. Structural estimation on the data suggests that peer‐induced fairness is more salient than distributional fairness.

In this article, we model various forms of non‐optimizing behavior in a newsvendor setting, including biases such as recency, reinforcement, demand chasing, and anchoring, as well as unsystematic decision errors. We assume that a newsvendor may evaluate decisions by examining both past outcomes and future expected payoffs. Our model is motivated by laboratory observations under several types of supply chain contracts. Ordering decisions are found to follow multi‐modal distributions that are dependent on contract structures and incentives. We differ from previous research by using statistics to determine which behavioral factors are applicable to each decision maker. A great deal of heterogeneity was discovered, indicating the importance of calibrating a contract to the individual. Our analysis also shows that the profit performance and the effectiveness of co‐ordinating contracts can be affected by non‐optimizing behaviors significantly. We conclude that, in addition to the aggregate order quantities, the decision distributions should be considered in designing contracts.

Rapid advances of information technology in recent years have enabled both the manufacturers and the retailers to operate their own Internet channels. In this study, we investigate the interaction between the capabilities of introducing the Internet channels, the pricing strategies, and the channel structure. We classify consumers into two segments: grocery shoppers attach a higher utility from purchasing through the physical channel, whereas a priori Internet shoppers prefer purchasing online. We find that when the Internet shoppers are either highly profitable or fairly unimportant, the manufacturer prefers to facilitate the channel separation either through his own Internet channel or the retailer's. In the intermediate region, however, the manufacturer encroaches the grocery shoppers and steals the demand from the retailer's physical channel. With horizontal competition between retailers, a priori symmetric retailers may adopt different channel strategies as a stable market equilibrium. The manufacturer may willingly give up his Internet channel and leverage on the retailer competition. When the manufacturer sells through an online e‐tailer, Internet shoppers may be induced to purchase through the physical channel. This reverse encroachment strategy emerges because selling through the e‐tailer leads to a more severe double marginalization problem.

We investigate strategic information sharing in two competing channels. The retailer in a channel can ex post decide whether to share private demand information with his upstream manufacturer after the content of information becomes known. We find that a retailer discloses low demand and withholds high demand to induce lower wholesale prices from his manufacturer. We show that a retailer should share less information when the retail market becomes more competitive, but should disclose more information when his capability to acquire information improves. When a decentralized supply chain competes with an integrated channel, we show that firms in the supply chain benefit from the rival channel's effort to improve information capability, that the incentive for the retailer in the supply chain to improve his information capability increases with the intensity of competition and with the rival channel's information capability, and that the retailer may not want to pursue perfect information acquisition even when doing so is costless. Extensive numerical studies demonstrate that similar results also hold for two decentralized supply chains competing with each other.

The basis for this article is an information‐processing view of the UN's cluster approach. We use agent‐based modeling and simulations to show that clusters, if properly utilized, encourage better information flow and thus facilitate effective response to disasters. The article intends to turn the attention of the humanitarian community to the importance of sharing information and the role of cluster leads in facilitating humanitarian aid. Our results indicate that if cluster leads act as information hubs, information reaches its target faster, enabling a prompt humanitarian response. In addition, we show that information quality is critical for effective resource utilization—if cluster leads filter information, it moves faster. We also found evidence that the willingness to exchange information plays a larger role in transmitting information than that of an information hub, particularly during later stages of response operations.

Information sharing in supply chains has become an important topic over the past decade. This study uses data from 617 Chinese manufacturing firms to investigate the relationships among competitive environments, supply chain information sharing (SCIS), and supply chain performance. The results of structural equation modeling analysis show that (i) international competition is positively related to all three types of SCIS whereas local competition is not significantly related to any of the three types, (ii) internal information sharing is positively related to external information sharing with suppliers and customers, and (iii) internal information sharing and information sharing with customers are positively related to superior supply chain performance, whereas supplier information sharing is not significantly related to performance. The findings enhance our understanding of the relationships among competitive environment, SCIS, and supply chain performance in Chinese manufacturing settings.

Advertising is a crucial tool for demand creation and market expansion. When a manufacturer uses a retailer as a channel for reaching end customers, the advertising strategy takes on an additional dimension: which party will perform the advertising to end customers. Cost sharing (“co‐operative advertising”) arrangements proliferate the option by decoupling the execution of the advertising from its funding. We examine the efficacy of cost sharing in a model of two competing manufacturer–retailer supply chains who sell partially substitutable products that may differ in market size. Some counterintuitive findings suggest that the firms performing the advertising would rather bear the costs entirely if this protects their unit profit margin. We also evaluate the implications of advertising strategy for overall supply chain efficiency and consumer welfare.

This article studies the performance of wholesale pricing when the supply chain partners' fairness concerns are private information. We find that some properties of wholesale pricing established under complete information hold under incomplete information as well. First, wholesale pricing can coordinate the supply chain, despite the information asymmetry, when fairness concerns are strong enough. Second, in the case when an equitable profit split does not imply that the retailers profit must be higher than that of the supplier, the suppliers' equilibrium offer is never rejected. Overall, the study makes two primary contributions. First, it provides a partial characterization of the equilibrium when the conditions required for coordination do not hold, that is, when fairness concerns are mild. In this case, the model predicts that the expected market price must be exactly the same as under complete information. The channel efficiency, nevertheless, is strictly lower than under complete information. The distribution‐free lower bound on channel efficiency suggests that this efficiency loss should be quite small, though. Second, it provides an experimental test of the models' predictions as well as a direct validation of the assumptions of preferences heterogeneity and mildness by obtaining the empirical distribution of the preferences.