cores of inventory centralization games abstract consider a set of n stores with single item and single period demands assume an option of centralized ordering and inventory with holding and penalty costs only in this case a cooperative inventory centralization game defines allocations of the cost we examine the conditions under which such an inventory centralization game has a nonempty core we prove the existence of nonempty core for demands with symmetric distributions and the existence of nonempty core for joint multivariate normal demand distribution we establish the equivalency of four different nonempty core conditions for the newsboy problem and demonstrate their efficacy for discrete independent and identically distributed iid demands journal of economic literature classification numbers c44 c62 c71

who moves first an intensity based measure for information flows across stock exchanges abstract in this paper we propose an innovative measure for information flows between stock exchanges we develop an intensity based information share using russell s 1999 autoregressive conditional intensity model thereby we maintain the irregular nature of financial high frequency data and use durations and timing of price changes to determine the informationally dominant market from our empirical application to us listed canadian stocks we conclude that the home market mostly reflects information first on the basis of a cross sectional analysis we find a positive correlation between the intensity based information share and liquidity

competition under consumer loss aversion we address the effect of expectation based consumer loss aversion on firm strategy in imperfect competition consumers are fully informed about match value and price at the moment of purchase however some consumers are initially uninformed about their tastes and form a reference point consisting of an expected match value and price distribution whereas others are perfectly informed all the time we show that if firms have symmetric costs a larger share of informed consumers leads to a more competitive outcome the reverse holds if cost asymmetry in duopoly is sufficiently large

credit spreads an empirical analysis on the informational content of stocks bonds and cds this paper explores the dynamic relationship between stock market implied credit spreads cds spreads and bond spreads a general vecm representation is proposed for changes in the three credit spread measures which accounts for zero one or two independent cointegration equations depending on the evidence provided by any particular company empirical analysis on price discovery based on a proprietary sample of north american and european firms and tailored to the specific vecm at hand indicates that stocks lead cds and bonds more frequently than the other way round it likewise confirms the leading role of cds with respect to bonds

collaborative replenishment in the presence of intermediaries in complex supply chains downstream buyers would often replenish individually from intermediaries instead of directly dealing with original manufacturers although collaborative replenishment from intermediaries might generate benefits significant cost reductions could be achieved when direct replenishments from manufacturers are considered this paper constructs a general model to study collaborative replenishment in multi product chains with alternative sources of supply i e manufacturers and intermediaries a collaborative organization determines the optimal choices of replenishment sources on behalf of its members to minimize collective costs we introduce a class of cooperative games associated with these situations and give sufficient conditions for their concavity we investigate the choice of allocation rule and its effect on supply chain efficiency when buyers strategically participate in the collaborative organization we prove that the shapley value coordinates the supply chain i e it makes complete participation the best strategy for buyers even under asymmetric information this setting is compared with an alternative structure where buyers can only collaborate in source specific replenishment organizations that purchase all requested products either from intermediaries or manufacturers although there are always participation strategies that result in minimum collective cost it is impossible to find allocation rules for source specific replenishment organizations that always motivate the buyers to choose such strategies

one security many markets determining the contributions to price discovery when homogeneous or closely linked securities trade in multiple markets it is often of interest to determine where price discovery the incorporation of new information occurs this article suggests an econometric approach based on an implicit unobservable efficient price common to all markets the information share associated with a particular market is defined as the proportional contribution of that market s innovations to the innovation in the common efficient price applied to quotes for the thirty dow stocks the technique suggests that the preponderance of the price discovery takes place at the new york stock exchange nyse a median 92 7 percent information share although most of the classic paradigms in market microstructure concern a security that trades in a single centralized market such situations are becoming increasingly rare in practice fragmentation the dispersal of trading in a security to multiple sites has emerged as a dominant institutional trend this process is of concern to financial economists and regulators because price information and price discovery the impounding of new information into the security price arguably the most important products of a security market have many attributes of public goods as the process of fragmentation accelerates it may be important to determine where the price information and price discovery are being produced 1 this paper suggests a practical econometric approach to this problem the technique is illustrated with an application to u s equity markets many stocks listed on the new york stock exchange nyse trade concurrently on the regional exchanges and the national association of securities dealers national market system nasd nms since a share of ibm stock is the same security whether purchased on the midwest or pacific exchange this is a particularly clear instance of multiple markets nevertheless the expres

the cost allocation issue in joint replenishment abstract joint replenishment for several products to achieve a lower inventory logistics cost has been a topic of extensive studies less attention has been paid to the issue of deciding how the joint replenishment costs should be allocated across the individual products ideally when items are ordered together one would require a stable cost allocation such that no subset of products subsidizes another subset when part of each product s ordering cost is product specific and part can be shared with other products like in a 3pl setting of anily and haviv it has been shown that even when a stable allocation exists such an allocation might be difficult to compute in addition usually the components of ordering costs are partially determined using estimates and accounting discretion this paper provides two main insights for determining an appropriate cost allocation it provides the means to test how sensitive a stable cost allocation is to a range of cost parameter values then in a computational study it is shown how to obtain a stable cost allocation without excessive computation

the newsvendor game has a nonempty core we settle an open conjecture regarding the newsvendor game we prove that its core is always non empty for all possible joint distributions of the random demands we give sufficient conditions under which the core is a singleton or it contains non negative elements

a behavioral analysis of stochastic reference dependence we examine the reference dependent risk preferences of k oszegi and rabin 2007 focusing on their choice acclimating personal equilibria concept we relate their model to other existing generalizations of expected utility we demonstrate that linear gain loss choice acclimating personal equilibria is equivalent to the intersection of quadratic utility and pessimistic rank dependent utility however it has only a trivial intersection i e expected utility with other referencedependent preferences we use these relationships to extend our understanding of k oszegi and rabin s model linking their functional form to behavior demonstrating new applications and deriving new tests and looking for support in existing experimental data 98 words

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

cooperation in service systems we consider a number of servers that may improve the efficiency of the system by pooling their service capacities to serve the union of the individual streams of customers this economies of scope phenomenon is due to the reduction in the steady state mean total number of customers in the system the question we pose is how the servers should split among themselves the cost of the pooled system when the individual incoming streams of customers form poisson processes and individual service times are exponential we define a transferable utility cooperative game in which the cost of a coalition is the mean number of customers or jobs in the pooled system we show that despite the characteristic function is neither monotone nor concave the game and its subgames possess nonempty cores in other words for any subset of servers there exist cost sharing allocations under which no partial subset can take advantage by breaking away and forming a separate coalition we give an explicit expression for all infinitely many nonnegative core cost allocations of this game finally we show that except for the case where all individual servers have the same cost there exist infinitely many core allocations with negative entries and we show how to construct a convex subset of the core where at least one server is being paid to join the grand coalition

news announcements and price discovery in foreign exchange spot and futures markets abstract this paper studies competition in price discovery between spot and futures rates for the eur usd and jpy usd markets around scheduled macroeconomic announcements using both the information shares approach and the common factor component weight approach for futures prices from the chicago mercantile exchange cme as well as deal prices from spot trading on the electronic broking services ebs we gauge how foreign exchange spot and futures markets respond to news surprises the results show that the spot rates provide more price discovery than do the cme futures rates overall however the contribution of the futures rates to price discovery increases in the time surrounding macroeconomic announcement releases

the cost allocation problem for the first order interaction joint replenishment model we consider an infinite horizon deterministic joint replenishment problem with first order interaction under this model the setup transportation reorder cost associated with a group of retailers placing an order at the same time equals some group independent major setup cost plus retailer dependent minor setup costs in addition each retailer is associated with a retailer dependent holding cost rate the structure of optimal replenishment policies is not known thus research has focused on optimal power of two pot policies following this convention we consider the cost allocation problem of an optimal pot policy among the various retailers for this sake we define a characteristic function that assigns to any subset of retailers the average time total cost of an optimal pot policy for replenishing the retailers in the subset under the assumption that these are the only existing retailers we show that the resulting transferable utility cooperative game with this characteristic function is concave in particular it is a totally balanced game namely this game and any of its subgames have nonempty core sets finally we give an example for a core allocation and prove that there are infinitely many core allocations

inventory centralization games with price dependent demand and quantity discount consider a distribution system consisting of a set of retailers facing a single period price dependent demand of a single product by taking advantage of the risk pooling effect and the quantity volume discount provided by suppliers or third party carriers the retailers may place joint orders and keep inventory at central warehouses before demand realization and allocate inventory among themselves after demand realization to reduce their operating costs under rather general assumptions we prove that there is a stable allocation of profits among the retailers in the sense that the resulting inventory centralization game has a nonempty core we also show how to compute an allocation in the core

a characterization of the price behavior of international dual stocks an error correction approach abstract the purpose of this study was to investigate dominant satellite relationships of dually listed stocks it deals with the interrelations between stocks listed and traded in two international unsynchronized markets the data exhibit first order non stationarity and the series across markets are cointegrated this gives a justification for an error correction model which incorporates a short run adjustment mechanism the model is applied for different day groups the main findings are 1 arbitrage opportunities are generally not available 2 the domestic country usually emerges as the dominant market and the foreign market as the satellite one 3 the adjustment mechanism coefficient is highly significant for most shares 4 different behavioral patterns emerge for middle of the week days as compared with beginning end of week days and 5 the model fits better for the more heavily traded shares

design and analysis of mechanisms for decentralized joint replenishment abstract we consider jointly replenishing multiple firms that operate under an eoq like environment in a decentralized non cooperative setting each firm s demand rate and inventory holding cost rate are private information we are interested in finding a mechanism that would determine the joint replenishment frequency and allocate the joint ordering costs to these firms based on their reported stand alone replenishment frequencies if they were to order independently we first provide an impossibility result showing that there is no direct mechanism that simultaneously achieves efficiency incentive compatibility individual rationality and budget balance we then propose a general two parameter mechanism in which one parameter is used to determine the joint replenishment frequency another is used to allocate the order costs based on firms reports we show that efficiency cannot be achieved in this two parameter mechanism unless the parameter governing the cost allocation is zero when the two parameters are same a single parameter mechanism we find the equilibrium share levels and corresponding total cost we finally investigate the effect of this parameter on equilibrium behavior we show that properly adjusting this parameter leads to mechanisms that are better than other mechanisms suggested earlier in the literature in terms of fairness and efficiency

pooling of spare parts between multiple users how to share the benefits companies that maintain capital goods e g airplanes or power plants often face high costs both for holding spare parts and due to downtime of their technical systems these costs can be reduced by pooling common spare parts between multiple companies in the same region but managers may be unsure about how to share the resulting costs or benefits in a fair way that avoids free riders to tackle this problem we study several players each facing a poisson demand process for an expensive low usage item they share a stock point that is controlled by a continuous review base stock policy with full backordering under an optimal base stock level costs consist of penalty costs for backorders and holding costs for on hand stock we propose to allocate the total costs proportional to players demand rates our key result is that this cost allocation rule satisfies many appealing properties it makes all separate participants and subgroups of participants better off it stimulates growth of the pool it can be easily implemented in practice and it induces players to reveal their private information truthfully to obtain these game theoretical results we exploit novel structural properties of the cost function in our s 1 s inventory model

capacity allocation and scheduling in supply chains we consider a multiple product supply chain where a manufacturer receives orders from several distributors if the orders cannot all be met from available production capacity then the manufacturer allocates that capacity and a set of resubmittable orders among the distributors the distributors may share their allocated capacity among themselves before submitting revised orders finally the manufacturer schedules the revised orders to minimize its cost we consider three practical coordination issues first we estimate the benefit to the manufacturer from considering scheduling costs and constraints in making capacity and order allocation decisions second we estimate the additional profit that the distributors achieve when they share their allocated capacity third we estimate the value of coordination between the manufacturer and the distributors our work is among the first to consider all three issues simultaneously we model scheduling costs and constraints within the manufacturer s capacity allocation problem we model the distributors capacity sharing problem as a cooperative game that has properties that are unique within cooperative game theory finally we develop optimal algorithms for all the models defined by the three coordination issues our exact evaluation of decisions about the appropriate coordination level improves managers ability to make those decisions

the determinants of price discovery evidence from us canadian cross listed shares abstract we examine the determinants of price discovery for canadian firms cross listed on the main us stock exchanges over the period 1996 2011 sampling at a one minute frequency we compute gonzalo and granger component shares cs and employ a system gmm approach to control for persistence in price discovery and endogeneity between cs and its determinants we find that price discovery is highly persistent and that there is strong evidence of simultaneity between cs and its determinants we conclude that lower relative spreads and higher relative trading activity increase an exchange s contribution to price discovery we also document that it is small trades that drive price discovery particularly since the introduction of decimalization

u k and u s trading of british cross listed stocks an intraday analysis of market integration this article analyzes intraday patterns for u k and u s trading of british cross listed stocks for each market the intraday patterns for these stocks closely resemble those of otherwise similar non cross listed stocks there is a 2 hour period each day when cross listed stocks are traded both in new york and in london this overlap is characterized by concentrated trading as private information originating in new york gets incorporated into prices in both markets cross border competition for order flow tends to reduce already declining spreads in london by contrast new york specialists maintain high spreads during the overlap overall the evidence indicates that order flow for cross listed securities is segmented article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

98 effective integer ratio lot sizing for one warehouse multi retailer systems a warehouse supplies n retailers constant external demand occurs at each retailer and shortages are not allowed there are linear holding costs and fixed costs for ordering at the warehouse and at each retailer the goal is to minimize the long run average cost over an infinite time horizon we define a new class of policies for this problem whose simple structure facilitates both computation and implementation the cost of a policy that is optimal within this class is shown to be within 2 of the cost of an optimal policy for the original problem in the worst case such a policy can be computed in on log n time

pricing and timing of consolidated deliveries in the presence of an express alternative financial and environmental analysis shipment consolidation has been advocated by researchers and politicians as a means to reduce cost and improve environmental performance of logistics activities this paper investigates consolidated transport solutions with a common shipment frequency when a service provider designs such a solution for its customers she faces a trade off to have the most time sensitive customers join the consolidated solution the frequency must be high which makes it difficult to gather enough demand to reach the scale economies of the solution but by not having the most time sensitive customers join there will be less demand per time unit which also makes it difficult to reach the scale economies in this paper we investigate the service provider s pricing and timing problem and the environmental implications of the optimal policy the service provider is responsible for multiple customers transports and offers all customers two long term contracts at two different prices direct express delivery with immediate dispatch at full cost or consolidated delivery at a given frequency at a reduced cost it is shown that the optimal policy is largely driven by customer heterogeneity limited heterogeneity in customers costs leads to very different optimal policies compared to large heterogeneity we argue that the reason so many consolidation projects fail may be due to a strategic mismatch between heterogeneity and consolidation policy we also show that even if the consolidated solution is implemented it may lead to a larger environmental impact than direct deliveries due to inventory build up or a higher than optimal frequency of the consolidated transport c 2015 elsevier b v and association of european operational research societies euro within the international federation of operational research societies ifors all rights reserved

cross border listings and price discovery evidence from u s listed canadian stocks we examine the contribution of cross listings to price discovery for a sample of canadian stocks listed on both the toronto stock exchange tse and a u s exchange we nd that priceson the tse and u s exchange are cointegrated and mutually adjusting the u s share of price discovery ranges from 0 2 percent to 98 2 percent with an average of 38 1 percent the u s share is directly related to the u s share of trading and to the ratio of proportions of informative tradeson the u s exchange and the tse and inversely related to the ratio of bid ask spreads with the enhanced globalization of nancial markets the number of non u s rms cross listing shares on a u s exchange has substantially increased attracting non u s listings is now a top priority of the u s stock exchanges at the end of 2000 420 non u s rmswere listed on the new york stock exchange nyse the number of foreign rmslisted on nasdaq waseven higher the popularity of international cross listings has prompted many academic studies on the topic 1 most of these studies focus on the bene ts of international cross listings including the reduced cost of capital and the enhanced liquidity of a rm s stock studiessuch asalexander eun and janakiramanan 1987 1988 and foerster and karolyi 1993 suggest that the cost of capital declines because the portion of the risk premium that compensates for cross border investment barriers dissipates miller 1999 and foerster and karolyi 1999 propose increased investor recognition as another possible explanation several studies examine changes in trading volume and costs due to international cross listing foerster and karolyi 1998 nd that the bid ask spreads in canada decrease after the cross listing of canadian stocks in the united states domowitz glen and madhavan 1998 suggest that the impact of cross listing is complex and depends on the degree of quote transparency that is the extent to which price information is observable in the two markets smith and so anos 1997 examine if cross listing is a zerosum game with increased trading in the united states being oiset by reduced

shipment consolidation who pays for it and how much this paper examines the subject of cost allocation in a multiple product inventory system allowing for consolidation of shipments if we order multiple items using an economic order quantity eoq policy and consolidate shipments part of the ordering cost is shared and part is specific to each item we want to find the consolidation choice with optimal total cost and divide the cost fairly among the individual items such a fair division is central to a costing system in which no group of items subsidizes the others there are no free riders we use a cooperative inventory game to determine when this can be done this game is usually not concave so we want to know what consolidation combinations determine when this cost can be fairly divided using the core of the game we prove that consolidation of all the items is cheaper exactly if there are fair cost allocations core of the game is not empty which happens when the portion of the ordering cost common to all items is not too small we further show how sensitive the nonempty core result is to adjustments in the cost parameters and show how to determine a threshold value for the shared ordering cost which assures the existence of a fair cost allocation

risk aversion in the theory of expected utility with rank dependent probabilities expected utility with rank dependent probability theory is a model of decision making under risk where the preference relations on the set of probability distributions is represented by the mathematical expectation of a utility function with respect to a transformation of the probability distributions on the set of outcomes this paper defines based on g teaux differentiability measures of risk aversion for such preferences which characterize the relation more risk averse and applies these measures to the analysis of unconditional and conditional portfolio choice problems

the dynamics of price discovery for cross listed shares evidence from australia and new zealand abstract this paper studies the dynamics of price discovery for markets with bilateral cross listings using a sample of four australian stocks cross listed in new zealand and five new zealand stocks cross listed in australia for the period january 2002 to december 2007 we assess hasbrouck 1995 information shares and grammig et al 2005 conditional information shares over time we observe that in both cases the home market is dominant in terms of price discovery however when studying price discovery over time we find that the importance of the australian market the larger of the two markets is increasing for both australian and new zealand domiciled firms finally using panel regression analysis we find that the growth in the importance of the australian market is positively related to the growth in the size of the firm and negatively related to the size of the percentage spread in the australian market implying that as firms grow larger and their cost of trading in australia declines the australian market becomes more informative

information shares in the us treasury market abstract this paper highlights the previously neglected role of the futures markets in us treasury price discovery the estimates of 5 and 10 year govpx spot market information shares typically fail to reach 50 from 1999 on the govpx information shares for the 2 year contract are higher than those of the 5 and 10 year maturities but also decline after 1998 relative bid ask spreads number of trades and realized volatility are statistically significant and explain up to 21 of daily information shares in roughly 1 4 of cases when public information is released the futures market gains information share but macroeconomic announcements rarely explain information shares independently of liquidity

exchange rate expectations and the pricing of chinese cross listed stocks abstract i show that the price discounts of chinese cross listed stocks american depositary receipts adrs and h shares to their underlying a shares indicate the expected yuan us dollar exchange rate the forecasting models reveal that adr and h share discounts predict exchange rate changes more accurately than the random walk and forward exchange rates particularly at long forecast horizons using panel estimations i find that adr and h share investors form their exchange rate expectations according to standard exchange rate theories such as the harrod balassa samuelson effect the risk of competitive devaluations relative purchasing power parity uncovered interest rate parity and the risk of currency crisis

setting the right incentives for global planning and operations we study incentive issues seen in a firm performing global planning and manufacturing and local demand management the stochastic demands in local markets are best observed by the regional business units and the firm relies on the business units forecasts for planning of global manufacturing operations we propose a class of performance evaluation schemes that induce the business units to reveal their private demand information truthfully by turning the business units demand revelation game into a potential game with truth telling being a potential maximizer an appealing refinement of nash equilibrium moreover these cooperative performance evaluation schemes satisfy several essential fairness notions after analyzing the characteristics of several performance evaluation schemes in this class we extend our analysis to include the impact of effort on demand

three variants on the allais example three variants on the famous allais example were administered to student subjects two variants involved small changes in the example yet greatly diminished the qualitative behavior known as the allais paradox the third variant is almost a direct test of daniel kahneman and amos tversky s certainty effect against mark machina s fanning out hypothesis the results favor the certainty effect over the fanning out hypothesis for at least the case of straight line indifference curves copyright 1989 by american economic association