Browsing by Author "Sethi, Suresh P."
Now showing 1 - 11 of 11
- Results Per Page
- Sort Options
Item Advance Selling in the Presence of Market Power and Risk-Averse Consumers(Wiley, 2018-07-18) Ma, Shanshan; Li, Guo; Sethi, Suresh P.; Zhao, Xuan; 0000-0001-9590-5627 (Sethi, SP); Sethi, Suresh P.We consider a manufacturer who procures raw material through a long-term contract as well as in a spot market to produce goods for selling to consumers, a fraction of whom are risk averse. We assume that the manufacturer has the market power to influence the spot market price of raw material. To increase consumer demand and obtain demand information, the manufacturer may implement an advance selling program that depends on his market power and consumer risk aversion. We investigate whether the manufacturer should offer the advance selling program and how his decision and performance are influenced by the program. We find that the advance selling program should be offered when consumer risk aversion is low, or when it is high, and the manufacturer has high and low market power. By contrast, the advance selling program should not be offered when consumer risk aversion is high and the market power is medium. Our results also reveal that even with no promotion cost of the advance selling program, the manufacturer may not always offer it. Finally, the manufacturer benefits more from advance selling when consumers are myopic and/or risk neutral.Item Advertising Competition with Market Expansion for Finite Horizon FirmsBass, Frank M.; Krishnamoorthy, A.; Prasad, Ashutosh; Sethi, Suresh P.Firms that want to increase the sales of their brands through advertising have the choice of capturing market share from their competitors through brand advertising, or increasing primary demand for the category through generic advertising. In this paper, differential game theory is used to analyze the effects of the two types of advertising decisions made by firms offering a product in a dynamic duopoly. Each firm's sales depend not only on its own and its competitor's brand advertising strategies, but also on the generic advertising expenditures of the two firms. Closed-loop Nash equilibrium solutions are obtained for symmetric and asymmetric competitors in a finite-horizon setting. The analysis for the symmetric case results in explicit solutions, and numerical techniques are employed to solve the problem for asymmetric firms.Item Analysis of Product Rollover Strategies in the Presence of Strategic Customers(INFORMS) Liang, Chao; Çakanyildirim, Metin; Sethi, Suresh P.Frequent product introductions emphasize the importance of product rollover strategies. With single rollover, when a new product is introduced, the old product is phased out from the market. With dual rollover, the old product remains in the market along with the new product. Anticipating the introduction of the new product and the potential markdown of the old product, strategic customers may delay their purchases. We study the interaction between product rollover strategies and strategic customer purchasing behavior and find that single rollover is more valuable when the new product's innovation is low and the number of strategic customers is high. Interestingly and counter to intuition, the firm may have to charge a lower price for the old product as well as receive a lower profit with a higher value disposal (outside) option for the old product under single rollover. Facing a market composed of both strategic and myopic customers, the firm does not necessarily reduce the stocking level as more myopic customers become strategic.Item Essays on Electric Vehicles Ecosystem Development(2022-12-01T06:00:00.000Z) Shi, Lingling; Çakanyıldırım, Metin; Sethi, Suresh P.; Zhou, Yibin; Hu, Bin; Qi, AnyanThis dissertation consists of three essays which study government subsidies, manufacturer decisions, and innovative business models motivated by problems in electric vehicle and other green product markets. In Chapter 2, we investigate the optimal consumer and station subsidies to promote electric vehicles by modeling the interactions between the government and the charging supplier. We formally show that the charging inconvenience is decreasing convex with the number of stations. In the expenditure minimization case, the optimal policy depends on the government adoption target and the charging station construction cost. We establish that expenditure minimization and adoption maximization yield the same subsidy policy if the charging inconvenience is linear. We also conduct a numerical study with real-life fueling data in Beijing, compute the optimal decisions and obtain the magnitude of subsidies and show their consistency with the analytical results. In Chapter 3, we develop two-period game-theoretical models between the government and the green product manufacturer(s) to study their optimal decisions in the context of subsidy termination. We also incorporate learning effect as green products are usually costly and present ample opportunities for cost reduction. Under subsidy termination, we find that the manufacturer would adopt a sandwiched pricing strategy and the government prefers no-advance sales termination mechanism which leads to lower subsidy expenditure. We further show that competition acts as a substitute for the subsidy, and thus the government can provide a lower consumer subsidy as the green product market matures to become competitive. Interestingly, the cooperation through group learning may outperform the competition between manufacturers. Our study illustrates these interesting ways subsidy, learning and competition interact with each other, which provide important managerial insights as well as practical suggestions to different players. In Chapter 4, we study a flexible electric vehicle battery lease program where customers lease batteries of their chosen capacities with the option to temporarily up/downgrade to batteries of different capacities during a peak period. Adopting a game-theoretical model, we find that the manufacturer may depend on acquiring additional batteries or reallocating customers’ batteries to satisfy the peak up/downgrade demands, and that flexible battery leasing can lead to win-win outcomes (increased manufacturer profit and reduced customer total cost) compared with simple battery leasing. The results are found to be robust for different levels of customer sophistication, noncommittal battery acquisition, and correlated regular and peak needs for range. These findings inform electric vehicle manufacturers adopting the innovative business model and highlight the value of flexible battery leasing.Item Impact of Power Structures in a Subcontracting Assembly System(Springer New York LLC) Li, G.; Li, L.; Liu, M.; Sethi, Suresh P.; Sethi, Suresh P.We investigate the impact of power structures on the production and pricing strategies in a decentralized subcontracting assembly system consisting of two suppliers (key supplier and subcontractor) and one manufacturer (assembler). The key supplier, who is also the general contractor, negotiates with the manufacturer and assigns partial component production to the subcontractor. We first identify a single power regime (SPR), in which either the key supplier or the manufacturer determines the wholesale price or the order/production quantity. Under SPR, we consider three power structures, namely, KSA, KAS, and SKA. We find that the assembly system will substantially benefit under KAS. Results show that the subcontracting mechanism between the two suppliers can increase each firm’s profit and disperse the bargaining power. Such a decentralization of powers can weaken the horizontal decentralization between the suppliers and improve the system’s performance, thereby achieving a win–win situation. Furthermore, we extend our analysis to a dual power regime (DPR), in which the key supplier or the manufacturer decides on price and quantity. We show that the proposed assembly system performs optimally under DPR. Moreover, the system will benefit if the firm that is substantially near the end market makes the centralization decision. Compared with the classical pull and push contract model, the proposed assembly system provides the best performance under DPR. © 2018, Springer Science+Business Media, LLC, part of Springer Nature.Item Online Market Entry and Channel Sharing Strategy with Direct Selling Diseconomies in the Sharing Economy Era(Elsevier B.V., 2019-05-16) Li, G.; Zhang, X.; Chiu, S. -M; Liu, M.; Sethi, Suresh P.; Sethi, Suresh P.Channel sharing is an important marketing strategy for giant retailers who sell their own store brands and resell national brands for cooperative manufacturers simultaneously. To expand their market and increase profitability, national brand manufacturers may consider entering the online market through direct selling. To counter such threats, retailers may adopt a channel sharing strategy on whether to terminate the national brand product-reselling business. We analyze three scenarios, namely, the base scenario (the retailer sells both brands), the dual channel scenario (the manufacturer enters the online market while the retailer sells both brands), and the termination scenario (each firm sells their own brand because of the retailer's termination of the reselling business) to investigate the strategic interactions between the retailer and the manufacturer. We find that the termination of channel sharing by the retailer is an ineffective threat to prevent the manufacturer from entering the online market when the direct selling diseconomy is relatively low; otherwise, the effectiveness of the retailer's threat hinges on the store brand's quality. Specifically, the retailer's threat is valid if the store brand products' quality is low, whereas such threat is invalid if the store brand's quality is high. Interestingly, our results also reveal that the retailer's profit suffers “a cliff-like drop” in the store brand's quality level. This finding suggests that selling a higher quality store brand may hurt the retailer's profit once the store brand's quality exceeds a certain threshold. ©2019 Elsevier B.V.Item Pricing Residential Electricity in the Presence of Distributed Solar Energy Generation, Limited Consumer Response and Microgrids(2021-08-01T05:00:00.000Z) Farajbakhsh Mamaghani, Fariba; Zentner, Alejandro; Cakanyildirim, Metin; Wang, Shouqiang; Alizamir, Saed; Sethi, Suresh P.; Honhon, DorotheeThis dissertation studies pricing of electricity in residential electricity markets. Among all the sectors (residential, commercial, industrial, and transportation) of the USA power market, the residential sector is the largest, with total revenue reaching more than 187 billion dollars in 2019. However, at the same time, this market is challenging to manage for the utilities primarily due to the growing supply and demand variability. Generation (often via intermittent renewable resources) of electricity by consumers and supply of the excess generation to the (main) grid induces supply variability. Extreme weather events (climate change) and limited attention of consumers to these lead to demand variability. In response to these challenges, local electricity generation and its local consumption are emerging as potential strategies, which are implemented in the form of microgrids. A microgrid is built in addition to the existing grid and it executes electricity purchase/sell transactions with the grid. Pricing of electricity in the presence of these fundamental demand and supply changes is an important issue. This dissertation consists of three main chapters to address this issue. In Chapter 2, we provide a revenue maximization formulation for a regulated utility and reveal the interaction between rising optimal prices and growing solar power adoption. This interaction can significantly reduce the number of customers of a utility and is referred to as the utility death spiral in the power industry. We propose electricity pricing mechanisms to slow down and stop this spiral. In Chapter 3, we propose a novel framework that formalizes a household’s electricity consumption through setting appliances (e.g., an air conditioner) to various levels. Focusing on the consumption decision making process, we provide a theoretical foundation for analyzing a consumer’s limited capability in responding to changes in her ambient environment. In Chapter 4, we consider a microgrid’s capacity, its excess demand/supply and the resulting transactions with the grid. The microgrid’s profit is formulated by taking the statistical dependence between the market demand and price into account and also by ignoring this dependence. We reveal the differences between these two profits and the optimal microgrid capacities they lead to. Our results shed some light on why microgrid investments made without incorporating the dependence can be disappointing.Item Scheduling in Production, Supply Chain and Industry 4.0 Systems by Optimal Control: Fundamentals, State-of-the-Art and Applications(Taylor & Francis Ltd, 2018-02-08) Dolgui, Alexandre; Ivanov, Dmitry; Sethi, Suresh P.; Sokolov, Boris; 0000-0001-9590-5627 (Sethi, SP); Sethi, Suresh P.This paper presents a survey on the applications of optimal control to scheduling in production, supply chain and Industry 4.0 systems with a focus on the deterministic maximum principle. The first objective is to derive major contributions, application areas, limitations, as well as research and application recommendations for the future research. The second objective is to explain control engineering models in terms of industrial engineering and production management. To achieve these objectives, optimal control models, qualitative methods of performance analysis and computational methods for optimal control are considered. We provide a brief historic overview and clarify major mathematical fundamentals whereby the control engineering terms are brought into correspondence with industrial engineering and management. The survey allows the grouping of models with only terminal constraints with application to master production scheduling, models with hybrid terminal-logical constraints with applications to short term job and flow shop scheduling, and hybrid structural-terminal-logical constraints with applications to customised assembly systems such as Industry 4.0. Computational algorithms in state, control and adjoint variable spaces are discussed.Item Sourcing Contract under Countervailing Incentives(Wiley-Blackwell, 2019-05-25) Gan, X.; Feng, Q.; Sethi, Suresh P.; 0000-0001-9590-5627 (Sethi, SP); Sethi, Suresh P.We study a retailer’s sourcing contract when the supplier’s reservation profit (offered by his outside options) depends on his cost, which is privately known to only the supplier. An interesting discovery from our analysis is that supply chain coordination may be achieved despite the information asymmetry between the two firms regarding the supplier’s type (i.e., his cost). This happens when the marginal contribution of the supplier’s cost efficiency to the trade matches with the supplier’s marginal reservation profit. In this case, the optimal contract quantities maximize the supply chain profits for the respective supplier types, and no information rent is paid to any supplier type. For the general case, we show that, regardless of his type, the supplier may have an incentive to overstate or understate his cost, depending on whether or not his marginal contribution to the trade exceeds his marginal reservation profit. We demonstrate six possible forms of the optimal contract. Observations from our analysis contrast with those derived from previous studies, complementing the theory of countervailing incentives. © 2019 Production and Operations Management SocietyItem Strategic Remanufacturing under Competition(De Gruyter, 2019-06-12) Ma, Zhongwen; Prasad, A.; Sethi, Suresh P.; 0000-0001-9590-5627 (Sethi, SP); Ma, Zhongwen; Sethi, Suresh P.We investigate firms' remanufacturing strategies for the case of a duopoly. On the one hand, remanufactured products cannibalize sales of new products of the same firm thereby hurting its profits. On the other hand, they can be part of a profitable marketing strategy that targets different customer preferences by providing a larger number of alternatives to customers. This paper studies the tradeoff between these effects and how it is influenced by competition. We develop a model where demand functions for new and remanufactured products of each firm are derived from utility maximization by a representative consumer. This allows us to capture preference and substitution effects between all offered products in the market. We discuss how equilibrium strategies are affected by factors such as competition, substitutability, production cost as well as remanufacturing cost. For example, when competitive intensity between new and new products, and remanufactured and remanufactured products, is (high), both (neither) firms offer remanufactured products in a symmetric equilibrium. If substitution between new and remanufactured products of the same firm is low, but the remanufactured product has a lower margin than the new product, firms can be worse off from remanufacturing. © 2019 Walter de Gruyter GmbH, Berlin/Boston.Item Supply Chain with Disruption Risks, Strategic Players, and Disobeying Players(2019-08) Shan, Xi; Sethi, Suresh P.We consider three problems in supply chain management. First one is a single period problem where a retailer sources from a supplier, whose reliability is private information and whose efforts to improve reliability is unobservable (hidden action). Second one is a problem of a retailer who orders from competing strategic suppliers subject to independent or correlated disruptions, and responds by setting the retail price upon delivery, called responsive pricing. The suppliers set their wholesale prices in a Nash game. Finally, we develop a model where firms decide to disobey some regulating rules by considering economic, moral, as well as behavioral factors in their decisions.