Özer, Özalp
Permanent URI for this collectionhttps://hdl.handle.net/10735.1/4233
Özalp Özer is the Ashbel Smith Professor of Management Science. "His recent research interest is to understand and quantify the role of non-pecuniary issues, such as trust and trustworthiness, in managing global supply chains. His general research interest is to investigate the impact of technology and information on product development, production, and distribution of goods and services, management and coordination of supply chains, and pricing management."
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Item Why Markdown as a Pricing Modality?(INFORMS (Instute for Operations Research and the Management Sciences), 2019-05) Adida, E.; Özalp Özer; 0000-0001-5552-0968 (Özalp, Ö); Özalp ÖzerMarkdown as a pricing modality is ubiquitous in retail whereas everyday low price (EDLP) remains relatively rare (despite its several advantages, such as simplicity). This paper explores whether and why retailers can use either of these pricing modalities as an effective defense against a competitor entering the market with the alternative pricing modality. Various studies have shown that consumers are strategic and heterogeneous in their valuation of a product. Consumers are also shown to be regret-prone, and anticipation of regret affects their purchase decisions. Consumers experience availability regret when they are unable to purchase products due to stockouts and high-price regret when they miss an opportunity to purchase products at low prices. Considering such factors, consumers decide whether, when, and from which retailer to purchase the product. In such a market environment, we find that the possible entry of a competitor should deter retailers from using the EDLP pricing modality but not markdown. We also identify a new reason for the markdown retailer to ration stock (in addition to the reason for discouraging consumers to wait for the markdown). In particular, we show that the markdown retailer can use inventory rationing to preclude a cutthroat competition and bankruptcy after the entry of an EDLP retailer. We also quantify how consumer regret affects both retailers' decisions and resulting profits. In particular, in a competitive market, the EDLP retailer cannot simply disregard consumers' availability and high-price regret (even when it stocks ample inventory and does not discount prices). We show that high-price regret and availability regret have complementary effects on the markdown retailer's rationing strategy and the EDLP retailer's price decision. Finally, using a proprietary price data set from a large department store, we show that ignoring regret factors causes the markdown retailer to leave up to 20% of its profits on the table. In addition, in a competitive market, the markdown retailer rations too aggressively when regret is ignored and, as a result, leaves some of the forgone profit to its competitor-the EDLP retailer. The retail industry is often characterized by its slim profit margins. In such an environment, the aforementioned results also suggest that retailers should seriously consider investing in developing the capacity to estimate and quantify the role of regret in consumers' purchase decisions. © 2018 INFORMS.Item Trust, Trustworthiness, and Information Sharing in Supply Chains Bridging China and the United States(INFORMS) Özer, Özalp; Zheng, Yanchong; Ren, YufeiWhether and how trust and trustworthiness differ between a collectivist society, e. g., China, and an individualistic one, e. g., the United States, generates much ongoing scientific debate and bears significant practical values for managing cross-country transactions. We experimentally investigate how supply chain members' countries of origin-China versus the United States-affect trust, trustworthiness, and strategic information sharing behavior in a cross-country supply chain. We consider a two-tier supply chain in which the upstream supplier solicits demand forecast information from the retailer to plan production; but the retailer has an incentive to manipulate her forecast to ensure abundant supply. The levels of trust and trustworthiness in the supply chain and supplier's capability to determine the optimal production quantity affect the efficacy of forecast sharing and the resulting profits. We develop an experimental design to disentangle these three aspects and to allow for real-time interactions between geographically distant and culturally heterogeneous participants. We observe that, when there is no prospect for long-term interactions, our Chinese participants consistently exhibit lower spontaneous trust and trustworthiness than their U. S. counterparts do. We quantify the differences in trust and trustworthiness between the two countries, and the resulting impact on supply chain efficiency. We also show that Chinese individuals exhibit higher spontaneous trust toward U. S. partners than Chinese ones, primarily because they perceive that individuals from the United States are more trusting and trustworthy in general. This positive perception toward U. S. people is indeed consistent with the U. S. participants' behavior in forecast sharing. In addition, we quantify that a Chinese supply chain enjoys a larger efficiency gain from repeated interactions than a U. S. one does, as the prospect of building a long-term relationship successfully sustains trust and trustworthiness by Chinese partners. We advocate that companies can reinforce the positive perception of westerners held by the Chinese population and commit to long-term relationships to encourage trust by Chinese partners. Finally, we also observe that both populations exhibit similar pull-to-center bias when solving a decision problem under uncertainty (i.e., the newsvendor problem). Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1905.