R K Amit

In this paper, we develop an optimal shelf-space stocking policy when demand, in addition to the exogenous uncertainty, is influenced by the amount of inventory displayed (supply) on the shelves. Our model exploits stochastic dominance condition; and, we assume that the distribution of realized demand with higher stocking level stochastically dominates the distribution of realized demand with lower stocking level. We show that the critical fractile with endogenous demand may not exceed the critical fractile of the classical newsvendor model. Our computational results validate the optimality of amount of units stocked on the retail shelves.

The objective of this paper is to develop a solution concept for stability of coalitional games with externalities. The existing solution concepts for this class of coalitional games can be empty. Using the partition function form representation, we propose a new solution concept called equivalence nucleolus, which is shown to be unique and always non-empty.

In this paper, we discuss a scenario in capital structure where two divisional managers compete for capital from a firm for their projects in a perfect information setting. We consider verifiable profits and study take-it-or-leave-it contracts where the managers ask for capital from the firm privately or sequentially in public and offer a part of the profit to the firm. Under capital constraint, we demonstrate that in private meeting, there is no sub game perfect Nash equilibrium (SPNE) in pure strategies; but in sequential public meeting, SPNE exists in pure strategies and, for the firm it is better to operate under capital constraint to increase the competition among managers.

Sustainable Development Goal 6.1 is “to achieve universal and equitable access to safe and affordable drinking water for all”. To measure affordability of accessing clean water, coping cost approach has been adopted, and this paper contributes to the burgeoning empirical literature on measuring affordability. The objective of this paper is to estimate coping costs related to the erratic, unsafe, and inadequate water supply in the metropolitan area of Chennai, India. Based on the data collected from 423 households, we find that households in Chennai city resort to five main types of coping behaviors: collecting, pumping, treating, storing, and purchasing. We employ the multiple regression with robust errors, to estimate the determinants of the coping costs. We obtain the mean coping costs as INR (Indian Rupee) 553, and INR 658 per month for piped and non-piped households in this sample. For non-piped households, collection costs (time costs in traveling and queuing for collecting water) constitute 22% of the coping costs, while collection costs for piped households are less 2% of the coping costs. One interesting finding is the variation of coping costs with household income—these costs are roughly 1% of income for the high income households to as high as 15% for the low income households. The results outline the need of policy intervention to enhance affordability.

In this paper, we consider a supply chain coordination problem when demand faced by a retailer is influenced by the amount of inventory displayed on the retail shelf. We assume that shelf space inventory is used as one of the levers to stimulate demand. Our objective in this research is to design individually rational contracts that coordinate the supply chain when the retailer faces inventory-level-dependent demand. We consider a buyback contract where any leftover inventory at the retailer can be returned to the supplier at a pre-specified terms of the buyback contract. The existing buyback contracts in the supply chain coordination literature do not guarantee the satisfaction of individual rationality constraint. A continuum of buyback contracts coordinate the supply chain. The contracts may differ on the basis of division of profits resulting in contracts that may not be individually rational. This motivates us to use the Shapley value from the cooperative game theory which ensures fairness and individual rationality in the buyback contract. We also provide managerial insights into the design of the contracts and analyze the impact of shelf space inventory on the contract parameters. © 2012 Elsevier B.V.

Risk neutral assumption in the newsvendor problem under recourse option predicts the order quantity insensitive to the selling price; and, risk aversion modeled through common utility functions gives decreasing order quantity with increasing selling price. In this paper, we consider loss aversion to model the choice preference of the decision maker in the newsvendor problem under recourse option, and prove that loss aversion predicts the rational ordering behavior of the newsvendor with respect to the changes in price and cost parameters. Further, we find that loss aversion can significantly improve the performance of utility function based models in predicting the rational behavior. We extend the analysis to a supply chain setting and establish coordinating contract between a loss averse retailer facing a newsvendor problem and a risk neutral supplier under recourse option. We find that the contract parameter does not depend on the loss aversion; hence, the same contract can be implemented with retailers with different levels of loss aversion.

We develop three parametric forecasting models that jointly estimate the volume component and the choice component of airline demand. These models—JFM-WPA, JFM-PA, and JFM-WTPU—account for (a) demand volume by considering the average demand of an O–D market, booking curve, seasonality and day-of-the-week indices, and (b) customer behavior by including the maximum willingness-to-pay of the customer and the choice attributes of the available options. We use a mixed logit function to formulate the willingness-to-pay and customer choice behavior. JFM-WPA excludes price from the set of choice attributes. JFM-PA considers price as one of the choice attributes. The utilities of maximum willingness-to-pay and choices are combined in JFM-WTPU. We propose a sequential method to estimate the forecasting models. We utilize the data generated by Airline Planning and Operations Simulator (APOS) from real airline historic data. We compare the models and present the results. These demand models can also be used as an input for optimization models, for joint seat allocation and pricing.

One of the important solution concepts in cooperative game theory is the Shapley value. The Shapley value is a probabilistic value in which each player subjectively assigns probabilities to the events which define their positions in a game. One of the most important concepts of subjective probability is the exchangeability. This paper characterizes the aspects of exchangeability in the Shapley value. We discuss exchangeability aspects in the Owen's multilinear characterization of the Shapley value; and, derive the Shapley value using exchangeability. We also link exchangeability to the Shapley's original derivation of the Shapley value. Lastly, we discuss exchangeability aspects in the semivalues. We show that, for a fixed finite set of players, the probability assignment in a semivalue cannot be a unique mixture of binomial distributions. © 2013 World Scientific Publishing Company.

To achieve the 'Zero emission mandate', India put forward the Electric Mobility Vision 2030 which aims that in 2030, Electric vehicles will contribute around 30% of total automobile sales. Uncertainty in the availability of battery raw materials and lack of battery manufacturing facility can be the bottlenecks in achieving the Vision 2030. In this paper, we develop a system dynamics model to analyze the effect of complex demand and supply dynamics of critical battery materials in the avenue of Electric Mobility Vision 2030. Our study indicates that fluctuations in the price of key battery materials - Lithium and Cobalt - can be a major deterrent in realizing the Vision 2030. Hence we need to model and predict the Demand vs. Supply dynamics so that we can take proactive steps towards mitigating the supply risks and realize the vision.

In the newsvendor setting, we consider a prospect theory model with a stochastic-subjective reference point. The reference point is based on the pay-offs corresponding to the extreme values of demand; and, is influenced by the perception of costs associated with understocking and overstocking, and the pessimism level of the decision maker. Our prospect theory model describes the recent observations in the newsvendor experiments—the non-linear ordering behavior with respect to the profit margin and behavior at the extreme profit margins, in addition to the pull-to-center effect and asymmetry in ordering.