Browsing by Subject "Asymmetric information"
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Item Open Access Delegation of stocking decisions under asymmetric demand information(Institute for Operations Research and the Management Sciences (INFORMS), 2021-01) Alp, Osman; Şen, AlperProblem definition: We consider the incentive design problem of a retailer that delegates stocking decisions to its store managers who are privately informed about local demand. Academic/practical relevance: Shortages are highly costly in retail, but are less of a concern for store managers, as their exact amounts are usually not recorded. In order to align incentives and attain desired service levels, retailers need to design mechanisms in the absence of information on shortage quantities. Methodology: The headquarters knows that the underlying demand process at a store is one of J possible Wiener processes, whereas the store manager knows the specific process. The store manager creates a single order before each period. The headquarters uses an incentive scheme that is based on the end-of-period leftover inventory and on a stock-out occasion at a prespecified inspection time before the end of a period. The problem for the headquarters is to determine the inspection time and the significance of a stock-out relative to leftover inventory in eval uating the performance of the store manager. We formulate the problem as a constrained nonlinear optimization problem in the single period setting and a dynamic program in the multiperiod setting. Results: We show that the proposed “early inspection” scheme leads to perfect alignment when J equals two under mild conditions. In more general cases, we show that the scheme performs strictly better than inspecting stock-outs at the end and achieves near-perfect alignment. Our numerical experiments, using both synthetic and real data, reveal that this scheme can lead to considerable cost reductions. Managerial im plications: Stock-out-related measures are typically not included in store managers’ performance scorecards in retail. We propose a novel, easy, and practical performance measurement scheme that does not depend on the actual amount of shortages. This new scheme incentivizes the store managers to use their private information in the retailer’s best interest and clearly outperforms centralized ordering systems that are common practice.Item Open Access Essays on non-cooperative inventory games(Bilkent University, 2012) Körpeoğlu, EvrenIn this thesis we study different non–cooperative inventory games. In particular, we focus on joint replenishment games and newsvendor duopoly under asymmetric information. Chapter 1 contains introduction and motivation behind the research. Chapter 2 is a preliminary chapter which introduce basic concepts used in the thesis such as Nash equilibrium, Bayesian Nash equilibrium and mechanism design. In Chapter 3, we study a non-cooperative game for joint replenishment of multiple firms that operate under an EOQ–like setting. Each firm decides whether to replenish independently or to participate in joint replenishment, and how much to contribute to joint ordering costs in case of participation. Joint replenishment cycle time is set by an intermediary as the lowest cycle time that can be financed with the private contributions of participating firms. We consider two variants of the participation-contribution game: in the single–stage variant, participation and contribution decisions are made simultaneously, and, in the two-stage variant, participating firms become common knowledge at the contribution stage. We characterize the behavior and outcomes under undominated Nash equilibria for the one-stage game and subgame-perfect equilibrium for the two-stage game. In Chapter 4, we extend the private contributions game to an asymmetric information counterpart. We assume each firm only knows the probability distribution of the other firms’ adjusted demand rates (demand rate multiplied by inventory holding cost rate). We show the existence of a pure strategy Bayesian Nash equilibrium for the asymmetric information game and provide its characterization. Finally, we conduct some numerical study to examine the impact of information asymmetry on expected and interim values of total contributions, cycle times and total costs. quantities for all firm types except the type that has the highest possible unit cost, who orders the same quantity as he would as a monopolist newsboy. Consequently, competition leads to higher total inventory in the industry. A firm’s equilibrium order quantity increases with a stochastic increase in the total industry demand or with an increase in his initial allocation of the total industry demand. Finally, we provide full characterization of the equilibrium, corresponding payoffs and comparative statics for a parametric special case with uniform demand and linear market shares.Item Open Access Information value of the interest rate and the zero lower bound(Cambridge University Press, 2020) Lee, Sang SeokWhy is a zero lower bound episode long-lasting and disruptive? This paper proposes the interruption of information flow from the central bank’s interest rate decision to the private sector as a channel by which the destabilizing effect of the zero lower bound constraint on the nominal interest rate is amplified. This mechanism is incorporated into the new Keynesian model by modifying its information structure. This paper shows that the information loss at the zero lower bound can increase (a) the duration of the zero lower bound episodes and (b) the size of deflation and output gap loss. The result in this paper demonstrates that enhanced information sharing by the central bank about the state of the economy can be effective at alleviating the cost of the zero lower bound.Item Open Access Newsvendor competition under asymmetric cost information(Elsevier B.V., 2018) Güler, K.; Körpeoğlu, E.; Şen, AlperWe study the newsboy duopoly problem under asymmetric cost information. We extend the Lippman and McCardle (1997) of competitive newsboy to the case where the two firms are privately informed about their unit costs. The market demand is initially split between two firms and the excess demand for each firm is reallocated to the rival firm. We show the existence and uniqueness of a pure strategy equilibrium and characterize its structure. The equilibrium conditions have an interesting recursive structure that enables an easy computation of the equilibrium order quantities. Presence of strategic interactions creates incentives to increase order quantities for all firm types except the type that has the highest possible unit cost. Consequently, competition leads to higher total inventory in the industry. However, contrary to intuition, this is only true when the firms are non-identical. A firm's equilibrium order quantity increases with a stochastic increase in the total industry demand or with an increase in his initial allocation of the total industry demand. We demonstrate our model and results in an application in a dual-sourcing procurement setting using data that obtained from a large manufacturing company. Finally, we provide a full characterization of the equilibrium of the game for the special case of uniform demand and linear market shares.Item Open Access Non-linear pricing by convex duality(Elsevier, 2015) Pınar, M. Ç.We consider the pricing problem of a risk-neutral monopolist who produces (at a cost) and offers an infinitely divisible good to a single potential buyer that can be of a finite number of (single dimensional) types. The buyer has a non-linear utility function that is differentiable, strictly concave and strictly increasing. Using a simple reformulation and shortest path problem duality as in Vohra (2011) we transform the initial non-convex pricing problem of the monopolist into an equivalent optimization problem yielding a closed-form pricing formula under a regularity assumption on the probability distribution of buyer types. We examine the solution of the problem when the regularity condition is relaxed in different ways, or when the production function is non-linear and convex. For arbitrary type distributions, we offer a complete solution procedure.