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Academic Lecture: 2015 International Workshop on Supply Chain Management
2015-6-5
Lecture 4: Two Newsvendors with Inventory Transshipment under Limited Supply
Time: 3:20-4:50pm, June 19th
Location: Room 128, Administative Building
Speaker: Prof. Daiyue, Fudan University
Abstract: Inventory transshipment between two newsvendors may generate a higher profit and has been shown to influence the newsvendors' strategic inventory decisions. We study a supply chain with inventory transshipment where two newsvendors place orders to a common supplier whose capacity is limited. If the newsvendors' total order quantity exceeds the capacity, all available supply will be allocated to them according to a pre-announced rule. After the demand is realized, the surplus inventory of one newsvendor may be transshipped, at an exogenous and fixed price, to the other newsvendor who has excess demand. In this newsvendor game, a Nash equilibrium of ordering decisions does not always exist. We investigate conditions for the existence and uniqueness of the Nash equilibrium. Subsequently, we show that the total newsvendor profit at the Nash equilibrium is non-decreasing in the supply capacity. Moreover, in some special cases, we identify the appropriate allocation rules such that the first-best inventory stocks under unlimited supply may lead to first-best inventory allocation under limited supply. An interesting effect of the supply constraint is that, inventory transshipment may not always benefit both newsvendors in terms of equilibrium profit, compared to the game under the same supply constraint but without inventory transshipment. Nevertheless, we show that at least one newsvendor can still benefit from inventory transshipment. Accordingly, we construct a coordinating contract that allows the newsvendors to negotiate the transshipment prices before placing orders to maximize the total profit such that both newsvendors can benefit from inventory transshipment.

Lecture 5: Price Matching Negotiation in Competitive Channels
Time: 8:30-10:00am, June 20th
Location: Room 128, Administative Building
Speaker: Dr. Gangshu Cai, Santa Clara University (USA)
Abstract: In price matching negotiation (PM), a channel matches its price with the resulting whole- sale price bargained earlier by the other channel. We investigate this negotiation mechanism and compare it with two benchmarks, simultaneous negotiation (SN) and sequential negotiation  (SQ). Through a common-seller two-buyer Bertrand competition model, we find that in PM the seller prefers to negotiate with the less powerful buyer, whereas in SQ the seller prefers to negotiate with the more powerful buyer first. Firms have different preferences for PM and the benchmarks, and their discrepancy is irreconcilable. With side payment or profit sharing coordination, however, PM can emerge as a mutually beneficial choice for all firms as compared to SN and SQ. We also study seller collusion in a bilateral channel model and find that PM incurs fewer collusion incentives than SN and SQ. When the buyers have asymmetric market sizes, ceteris paribus, the seller prefers to negotiate with the bigger buyer in PM. We finally demonstrate that our main qualitative results are robust in Cournot competition.


Lecture 6: Opaque Distribution Channels for Competing Service Providers: Posted Price vs. Name-Your-Own-Price Mechanisms
Time: 10:20-11:50am, June 20th
Location: Room 128, Administative Building
Speaker: Rachel R. Chen, University of California at Davis (USA)
Abstract: Opaque selling has been widely adopted by service providers in the travel industry to sell off leftover capacity under stochastic demand. We consider a two stage model to study the impact of different selling mechanisms, Posted Price (PP) vs. Name-Your-Own-Price (NYOP), of an opaque reseller on competing service providers who face forward-looking customers. We find that in this environment, providers prefer that the opaque reseller uses a posted price instead of a bidding model. This is because the ability to set retail prices is critical for extracting surplus from customers who wait to purchase from the reseller. Such surplus extraction enables providers to set high prices for advance sales and obtain high profits. The dominance of PP over NYOP disappears, however, when competition between sellers is minimal or absent. We extend our model to multiple opaque resellers who compete in selling off last-minute capacity for service providers, and find that our main insights continue to hold with differentiated resellers. Despite providers’ preference in favor of PP, there are circumstances under which the opaque reseller earns higher profits under NYOP. Leisure customers might also prefer the bidding mechanism, which allows them to retain some surplus. This can help explain the rapid growth of the NYOP model over the last decade. Our findings are consistent with the evolution of opaque selling in the travel industry, and in particular, the recent trend towards more published price sales for opaque products.


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