Reliability evaluation under shock models has attracted considerable attention in the literature. Existing research on shock models has focused primarily on damage effects of shocks treated as constants after the arrivals of shocks. Due to the presence of self‐healing, deterioration, and variation over time, the damage effects caused by the shocks may have some evolutions. In this work, we focus on arrivals of shocks that follow a continuous‐time renewal process, and a Markov process that describes the evolution of shock damage. In this regard, we develop here two kinds of shock models and then derive system reliabilities under these two kinds of shock models. The asymptotic behavior of the damage evolution process of each shock is then discussed, and the probabilities of each shock eventually disappearing and destroying the system are derived through the use of aggregated stochastic processes. Finally, the results and numerical examples are presented for three special cases, namely: (1) when the inter‐arrival times of the shocks follow exponential distribution, (2) when the inter‐arrival times of the shocks follow Erlang distribution, and (3) when the inter‐arrival times of the shocks follow uniform distribution.
{"title":"Reliability analysis for shock systems based on damage evolutions via Markov processes","authors":"Juan Yin, Lirong Cui","doi":"10.1002/nav.22091","DOIUrl":"https://doi.org/10.1002/nav.22091","url":null,"abstract":"Reliability evaluation under shock models has attracted considerable attention in the literature. Existing research on shock models has focused primarily on damage effects of shocks treated as constants after the arrivals of shocks. Due to the presence of self‐healing, deterioration, and variation over time, the damage effects caused by the shocks may have some evolutions. In this work, we focus on arrivals of shocks that follow a continuous‐time renewal process, and a Markov process that describes the evolution of shock damage. In this regard, we develop here two kinds of shock models and then derive system reliabilities under these two kinds of shock models. The asymptotic behavior of the damage evolution process of each shock is then discussed, and the probabilities of each shock eventually disappearing and destroying the system are derived through the use of aggregated stochastic processes. Finally, the results and numerical examples are presented for three special cases, namely: (1) when the inter‐arrival times of the shocks follow exponential distribution, (2) when the inter‐arrival times of the shocks follow Erlang distribution, and (3) when the inter‐arrival times of the shocks follow uniform distribution.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"93 1","pages":"246 - 260"},"PeriodicalIF":0.0,"publicationDate":"2022-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86976912","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Many sellers provide products for consumers directly on online platforms. This selling format is labeled “agency selling.” In this article, we investigate the platform's contract design and the seller's quality and return decisions in the agency selling. We find that the platform chooses a high commission rate to induce the seller to accept returns when the salvage factor is large enough or the consumers' willingness to pay for quality is sufficiently low. Compared to the direct channel, the seller is more likely to accept returns in the agency selling. Moreover, if the consumers' willingness to pay for quality increases, the platform intends to reduce the commission rate to induce the seller to increase the quality. The commission rate makes no influence on the generosity of the refund. However, when the consumers' willingness to pay for quality is sufficiently large, the platform prefers the seller to offer no refund and the commission rate may increase in the consumers' willingness to pay for quality. Finally, we consider two extensions: quality affects satisfaction probability and return window.
{"title":"Commission, product quality and return policy in agency selling","authors":"L. Hsiao, Ying‐Ju Chen, Hui Xiong","doi":"10.1002/nav.22094","DOIUrl":"https://doi.org/10.1002/nav.22094","url":null,"abstract":"Many sellers provide products for consumers directly on online platforms. This selling format is labeled “agency selling.” In this article, we investigate the platform's contract design and the seller's quality and return decisions in the agency selling. We find that the platform chooses a high commission rate to induce the seller to accept returns when the salvage factor is large enough or the consumers' willingness to pay for quality is sufficiently low. Compared to the direct channel, the seller is more likely to accept returns in the agency selling. Moreover, if the consumers' willingness to pay for quality increases, the platform intends to reduce the commission rate to induce the seller to increase the quality. The commission rate makes no influence on the generosity of the refund. However, when the consumers' willingness to pay for quality is sufficiently large, the platform prefers the seller to offer no refund and the commission rate may increase in the consumers' willingness to pay for quality. Finally, we consider two extensions: quality affects satisfaction probability and return window.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"1 1","pages":"231 - 245"},"PeriodicalIF":0.0,"publicationDate":"2022-12-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89193546","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Joint consideration of inventory and shipment decisions is an important aspect of obtaining economically and environmentally sustainable distribution systems. We consider this issue in the context of a one‐warehouse‐multiple‐retailer inventory system with quantity‐based shipment consolidation to groups of nonidentical retailers facing Poisson demand. The system is centralized, with free information sharing and access to real‐time point of sale data. Thus, demand information at the retailers is immediately conveyed upstream to the warehouse without any fixed ordering costs. However, fixed costs associated with handling and transporting goods from the warehouse to the retailers are reflected in the shipment consolidation policy. Stock replenishments at the warehouse are made from an outside supplier/manufacturer according to an (R, Q) policy. For this system, we derive an exact recursive method for determining the inventory level distributions at the retailers. This allows us to evaluate the expected inventory and shipment costs, fill‐rates, and transport emissions for the entire system. We also show how to optimize the system by providing bounds on the optimal shipment quantities and the warehouse reorder level.
{"title":"Evaluation and control of inventory distribution systems with quantity based shipment consolidation","authors":"F. Malmberg, Johan Marklund","doi":"10.1002/nav.22090","DOIUrl":"https://doi.org/10.1002/nav.22090","url":null,"abstract":"Joint consideration of inventory and shipment decisions is an important aspect of obtaining economically and environmentally sustainable distribution systems. We consider this issue in the context of a one‐warehouse‐multiple‐retailer inventory system with quantity‐based shipment consolidation to groups of nonidentical retailers facing Poisson demand. The system is centralized, with free information sharing and access to real‐time point of sale data. Thus, demand information at the retailers is immediately conveyed upstream to the warehouse without any fixed ordering costs. However, fixed costs associated with handling and transporting goods from the warehouse to the retailers are reflected in the shipment consolidation policy. Stock replenishments at the warehouse are made from an outside supplier/manufacturer according to an (R, Q) policy. For this system, we derive an exact recursive method for determining the inventory level distributions at the retailers. This allows us to evaluate the expected inventory and shipment costs, fill‐rates, and transport emissions for the entire system. We also show how to optimize the system by providing bounds on the optimal shipment quantities and the warehouse reorder level.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"10 1","pages":"205 - 227"},"PeriodicalIF":0.0,"publicationDate":"2022-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86210925","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The assignment of personnel to teams is a fundamental managerial function typically involving several objectives and a variety of idiosyncratic practical constraints. Despite the prevalence of this task in practice, the process is seldom approached as an optimization problem over the reported preferences of all agents. This is due in part to the underlying computational complexity that occurs when intra‐team interpersonal interactions are taken into consideration, and also due to game‐theoretic considerations, when those taking part in the process are self‐interested agents. Variants of this fundamental decision problem arise in a number of settings, including, for example, human resources and project management, military platooning, ride sharing, data clustering, and in assigning students to group projects. In this article, we study an analytical approach to “team formation” focused on the interplay between two of the most common objectives considered in the related literature: economic efficiency (i.e., the maximization of social welfare) and game‐theoretic stability (e.g., finding a core solution when one exists). With a weighted objective across these two goals, the problem is modeled as a bi‐level binary optimization problem, and transformed into a single‐level, exponentially sized binary integer program. We then devise a branch‐cut‐and‐price algorithm and demonstrate its efficacy through an extensive set of simulations, with favorable comparisons to other algorithms from the literature.
{"title":"Balancing stability and efficiency in team formation as a generalized roommate problem","authors":"Hoda Atef Yekta, David Bergman, Robert W. Day","doi":"10.1002/nav.22084","DOIUrl":"https://doi.org/10.1002/nav.22084","url":null,"abstract":"The assignment of personnel to teams is a fundamental managerial function typically involving several objectives and a variety of idiosyncratic practical constraints. Despite the prevalence of this task in practice, the process is seldom approached as an optimization problem over the reported preferences of all agents. This is due in part to the underlying computational complexity that occurs when intra‐team interpersonal interactions are taken into consideration, and also due to game‐theoretic considerations, when those taking part in the process are self‐interested agents. Variants of this fundamental decision problem arise in a number of settings, including, for example, human resources and project management, military platooning, ride sharing, data clustering, and in assigning students to group projects. In this article, we study an analytical approach to “team formation” focused on the interplay between two of the most common objectives considered in the related literature: economic efficiency (i.e., the maximization of social welfare) and game‐theoretic stability (e.g., finding a core solution when one exists). With a weighted objective across these two goals, the problem is modeled as a bi‐level binary optimization problem, and transformed into a single‐level, exponentially sized binary integer program. We then devise a branch‐cut‐and‐price algorithm and demonstrate its efficacy through an extensive set of simulations, with favorable comparisons to other algorithms from the literature.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"28 1","pages":"72 - 88"},"PeriodicalIF":0.0,"publicationDate":"2022-12-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89267369","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Considering the important realistic benefits of drones combined with trucks for last‐mile parcel deliveries, we define the truck–drone routing problem with time windows (TDRP‐TW). The TDRP‐TW has the characteristics of time windows, synchronization en route, direct delivery, multiple trucks, and multiple drones carried by each truck. Customers covered by truck routes can be used as drone launch/retrieval locations, which are called satellites in this study. The synchronization en route enables drones to launch from trucks to return to paired trucks at nodes other than departure sites if necessary. We present an effective branch‐price‐and‐cut algorithm, in which a concept named candidate forward‐satellite (CFS) is introduced to manage the labeling challenge caused by the synchronization en route. In addition, the branch‐price‐and‐cut algorithm is combined with an adaptive large neighborhood search to obtain approximation solutions for large‐scale instances. In the computational experiments, instances with up to 50 customers are solved to optimality, and approximation solutions of large‐scale instances with 100 customers are presented.
{"title":"Branch‐price‐and‐cut for the truck–drone routing problem with time windows","authors":"Hong-qi Li, Feilong Wang","doi":"10.1002/nav.22087","DOIUrl":"https://doi.org/10.1002/nav.22087","url":null,"abstract":"Considering the important realistic benefits of drones combined with trucks for last‐mile parcel deliveries, we define the truck–drone routing problem with time windows (TDRP‐TW). The TDRP‐TW has the characteristics of time windows, synchronization en route, direct delivery, multiple trucks, and multiple drones carried by each truck. Customers covered by truck routes can be used as drone launch/retrieval locations, which are called satellites in this study. The synchronization en route enables drones to launch from trucks to return to paired trucks at nodes other than departure sites if necessary. We present an effective branch‐price‐and‐cut algorithm, in which a concept named candidate forward‐satellite (CFS) is introduced to manage the labeling challenge caused by the synchronization en route. In addition, the branch‐price‐and‐cut algorithm is combined with an adaptive large neighborhood search to obtain approximation solutions for large‐scale instances. In the computational experiments, instances with up to 50 customers are solved to optimality, and approximation solutions of large‐scale instances with 100 customers are presented.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"4 1","pages":"184 - 204"},"PeriodicalIF":0.0,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87768109","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
As retail platforms proliferate, the presence of agency selling and reselling in burgeoning retail platforms gives suppliers an incentive to match their product lines to sales channels. This study considers a supplier providing a product line of quality‐differentiated products in a retail platform. We aim to examine the equilibrium pricing in two mutually exclusive channel matching strategies: high‐end (low‐end) products are sold in an agency selling channel and low‐end (high‐end) products are sold in a reselling channel (termed channel matching strategies HL [LH]), and further analyze the impact of quality differentiation on the channel matching strategies and equilibrium outcomes. The results show that the impact of quality differentiation on channel matching strategies is jointly moderated by the channel competition, the commission rate, and the product cost difference. If the channel competition is intensive and the commission rate is low, under small (large) product cost difference, quality differentiation motivates the supplier to select strategy HL (LH). Counter‐intuitively, we show that improving the quality of high‐end products in a certain region at free of cost could make the supplier worse off when the product cost difference is sufficiently high. Interestingly, we find that when both the product cost difference and commission rate are small, the channel matching strategies can achieve a win‐win‐win situation for the supplier, the retail platform, and consumers simultaneously under a moderate (low) level of quality differentiation and intensive (weak) channel competition.
{"title":"Implications of product line competition on channel matching strategies in a retail platform","authors":"B. Dai, Ming Wang, Jiannan Ke","doi":"10.1002/nav.22088","DOIUrl":"https://doi.org/10.1002/nav.22088","url":null,"abstract":"As retail platforms proliferate, the presence of agency selling and reselling in burgeoning retail platforms gives suppliers an incentive to match their product lines to sales channels. This study considers a supplier providing a product line of quality‐differentiated products in a retail platform. We aim to examine the equilibrium pricing in two mutually exclusive channel matching strategies: high‐end (low‐end) products are sold in an agency selling channel and low‐end (high‐end) products are sold in a reselling channel (termed channel matching strategies HL [LH]), and further analyze the impact of quality differentiation on the channel matching strategies and equilibrium outcomes. The results show that the impact of quality differentiation on channel matching strategies is jointly moderated by the channel competition, the commission rate, and the product cost difference. If the channel competition is intensive and the commission rate is low, under small (large) product cost difference, quality differentiation motivates the supplier to select strategy HL (LH). Counter‐intuitively, we show that improving the quality of high‐end products in a certain region at free of cost could make the supplier worse off when the product cost difference is sufficiently high. Interestingly, we find that when both the product cost difference and commission rate are small, the channel matching strategies can achieve a win‐win‐win situation for the supplier, the retail platform, and consumers simultaneously under a moderate (low) level of quality differentiation and intensive (weak) channel competition.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"499 1","pages":"145 - 164"},"PeriodicalIF":0.0,"publicationDate":"2022-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78136048","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The aim of this study was to analyze and evaluate synchronization and stability issues for the planning, operation, and control of processes in automotive transportation networks. We modeled transportation networks by using a coupled oscillator network based on a modified Kuramoto model. Each transport process was mapped as a phase oscillator indicating the transport time, period, and delay. The method could be applied to complex networks where it has not been possible to find analytical solutions. The novel generic oscillator approach was then applied to two transport topologies, namely, milk‐run and just‐in‐sequence transport, based on real‐world problems from a German car manufacturer. We conducted a detailed study of the parameter regions where different synchronization regimes occurred and investigated how the topology influenced the stability and dynamic behavior of transport networks. In particular, we focused on how transport period offsets and transport delays affected synchronous states. We showed that by the introduction of a transport synchronization matrix, the synchronization states in a transport network could be represented in a compact and comprehensive manner. Moreover, thresholds for round‐trip stability could be calculated by analyzing the phase decoupling of a milk‐run. These results were used for the vehicle route planning of milk‐runs with synchronization constraints. Furthermore, the influence of the time delay of a track and trace system on the transport synchronization was analyzed. Finally, for the subsequent investigation of a just‐in‐sequence transport network, we showed how an adaptive control mechanism could re‐synchronize an out‐of‐tune delivery process.
{"title":"Synchronization and stability in automotive transportation networks","authors":"F. Klug","doi":"10.1002/nav.22089","DOIUrl":"https://doi.org/10.1002/nav.22089","url":null,"abstract":"The aim of this study was to analyze and evaluate synchronization and stability issues for the planning, operation, and control of processes in automotive transportation networks. We modeled transportation networks by using a coupled oscillator network based on a modified Kuramoto model. Each transport process was mapped as a phase oscillator indicating the transport time, period, and delay. The method could be applied to complex networks where it has not been possible to find analytical solutions. The novel generic oscillator approach was then applied to two transport topologies, namely, milk‐run and just‐in‐sequence transport, based on real‐world problems from a German car manufacturer. We conducted a detailed study of the parameter regions where different synchronization regimes occurred and investigated how the topology influenced the stability and dynamic behavior of transport networks. In particular, we focused on how transport period offsets and transport delays affected synchronous states. We showed that by the introduction of a transport synchronization matrix, the synchronization states in a transport network could be represented in a compact and comprehensive manner. Moreover, thresholds for round‐trip stability could be calculated by analyzing the phase decoupling of a milk‐run. These results were used for the vehicle route planning of milk‐runs with synchronization constraints. Furthermore, the influence of the time delay of a track and trace system on the transport synchronization was analyzed. Finally, for the subsequent investigation of a just‐in‐sequence transport network, we showed how an adaptive control mechanism could re‐synchronize an out‐of‐tune delivery process.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"118 1","pages":"165 - 183"},"PeriodicalIF":0.0,"publicationDate":"2022-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85611236","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study aims to determine and evaluate dynamic idling policies where an agent can idle while some customers remain waiting. This type of policies can be employed in situations where the flow of urgent customers does not allow the agent to spend sufficient time on back‐office tasks. We model the system as a single‐agent exponential queue with abandonment. The objective is to minimize the system's congestion while ensuring a certain proportion of idling time for the agent. Using a Markov decision process approach, we prove that the optimal policy is a threshold policy according to which the agent should idle above (below) a certain threshold on the queue length if the congestion‐related performance measure is concave (convex) with respect to the number of customers present. We subsequently obtain the stationary probabilities, performance measures, and idling time duration, expressed using complex integrals. We show how these integrals can be numerically computed and provide simpler expressions for fast‐agent and heavy‐traffic asymptotic cases. In practice, the most common way to regulate congestion is to control access to the service by rejecting some customers upon arrival. Our analysis reveals that idling policies allow high levels of idling probability that such rejection policies cannot reach. Furthermore, the greatest benefit of implementing an optimal idling policy occurs when the objective occupation rate is close to 50% in highly congested situations.
{"title":"Dynamic policy for idling time preservation","authors":"B. Legros","doi":"10.1002/nav.22086","DOIUrl":"https://doi.org/10.1002/nav.22086","url":null,"abstract":"This study aims to determine and evaluate dynamic idling policies where an agent can idle while some customers remain waiting. This type of policies can be employed in situations where the flow of urgent customers does not allow the agent to spend sufficient time on back‐office tasks. We model the system as a single‐agent exponential queue with abandonment. The objective is to minimize the system's congestion while ensuring a certain proportion of idling time for the agent. Using a Markov decision process approach, we prove that the optimal policy is a threshold policy according to which the agent should idle above (below) a certain threshold on the queue length if the congestion‐related performance measure is concave (convex) with respect to the number of customers present. We subsequently obtain the stationary probabilities, performance measures, and idling time duration, expressed using complex integrals. We show how these integrals can be numerically computed and provide simpler expressions for fast‐agent and heavy‐traffic asymptotic cases. In practice, the most common way to regulate congestion is to control access to the service by rejecting some customers upon arrival. Our analysis reveals that idling policies allow high levels of idling probability that such rejection policies cannot reach. Furthermore, the greatest benefit of implementing an optimal idling policy occurs when the objective occupation rate is close to 50% in highly congested situations.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"21 1","pages":"53 - 71"},"PeriodicalIF":0.0,"publicationDate":"2022-11-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78069054","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Capacity providers such as airlines and hotels have traditionally increased revenues by practicing market segmentation and revenue management, enabling them to sell the same capacity pool to different consumers at different prices. Callable products can enhance profits and improve consumers' welfare by allowing the firm to broker capacity between consumers with different willingness to pay. A consumer who buys a callable product gives the capacity provider the right to recall capacity at a prespecified recall price. This article studies callable products in the context of the model most commonly used in industry, which handles time implicitly imposing fewer restrictions on the nature of randomness compared to the Poisson arrival process favored in academia. In the implicit time model, capacity providers set booking limits to protect capacity for future high‐fare demand. Our numerical study identifies conditions where callable products result in significant gains in profits.
{"title":"Callable products for an implicit time model with dependent demands","authors":"G. Gallego, Haengju Lee","doi":"10.1002/nav.22085","DOIUrl":"https://doi.org/10.1002/nav.22085","url":null,"abstract":"Capacity providers such as airlines and hotels have traditionally increased revenues by practicing market segmentation and revenue management, enabling them to sell the same capacity pool to different consumers at different prices. Callable products can enhance profits and improve consumers' welfare by allowing the firm to broker capacity between consumers with different willingness to pay. A consumer who buys a callable product gives the capacity provider the right to recall capacity at a prespecified recall price. This article studies callable products in the context of the model most commonly used in industry, which handles time implicitly imposing fewer restrictions on the nature of randomness compared to the Poisson arrival process favored in academia. In the implicit time model, capacity providers set booking limits to protect capacity for future high‐fare demand. Our numerical study identifies conditions where callable products result in significant gains in profits.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"9 1","pages":"121 - 128"},"PeriodicalIF":0.0,"publicationDate":"2022-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85398718","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Increased public concerns about animal welfare have spurred new regulations to improve animals' treatment and living conditions. We study how these regulations affect firms' product offerings, prices, and profits. We consider two competing animal agriculture supply chains, each consisting of a supplier and a buyer. New regulations require firms to choose between offering humane or organic products, which are differentiated by animals' living conditions. We find that consumers' growing awareness of animal welfare encourages firms to offer organic products, which require the highest standards for animals' living conditions. We also show that tightening humane product standards and loosening organic product standards encourage firms to offer organic products—but with distinct pricing implications. The former leads to higher retail prices whereas the latter may lower retail prices. Depending on costs and consumers' awareness of animal welfare, a humane product may be priced higher or lower than an organic product. Furthermore, we provide conditions under which a regulator should offer a unit‐cost or an investment cost subsidy to improve social welfare. We show that subsidies can encourage firms to change from offering humane to organic products, or vice versa, to enhance total social welfare.
{"title":"The impact of animal welfare regulations on firms' product offerings: Humane or organic product?","authors":"Zhiping Lin, Wenli Xiao, Yen-Ting Lin, Yinping Mu","doi":"10.1002/nav.22082","DOIUrl":"https://doi.org/10.1002/nav.22082","url":null,"abstract":"Increased public concerns about animal welfare have spurred new regulations to improve animals' treatment and living conditions. We study how these regulations affect firms' product offerings, prices, and profits. We consider two competing animal agriculture supply chains, each consisting of a supplier and a buyer. New regulations require firms to choose between offering humane or organic products, which are differentiated by animals' living conditions. We find that consumers' growing awareness of animal welfare encourages firms to offer organic products, which require the highest standards for animals' living conditions. We also show that tightening humane product standards and loosening organic product standards encourage firms to offer organic products—but with distinct pricing implications. The former leads to higher retail prices whereas the latter may lower retail prices. Depending on costs and consumers' awareness of animal welfare, a humane product may be priced higher or lower than an organic product. Furthermore, we provide conditions under which a regulator should offer a unit‐cost or an investment cost subsidy to improve social welfare. We show that subsidies can encourage firms to change from offering humane to organic products, or vice versa, to enhance total social welfare.","PeriodicalId":19120,"journal":{"name":"Naval Research Logistics (NRL)","volume":"16 1","pages":"104 - 89"},"PeriodicalIF":0.0,"publicationDate":"2022-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82696069","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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