the allocation of inventory risk in a supply chain push pull and advance purchase discount contracts while every firm in a supply chain bears supply risk the cost of insufficient supply some firms may even with wholesale price contracts completely avoid inventory risk the cost of unsold inventory with a push contract there is a single wholesale price and the retailer by ordering his entire supply before the selling season bears all of the supply chain s inventory risk a pull contract also has a single wholesale price but the supplier bears the supply chain s inventory risk because only the supplier holds inventory while the retailer replenishes as needed during the season examples include vendor managed inventory with consignment and drop shipping an advance purchase discount has two wholesale prices a discounted price for inventory purchased before the season and a regular price for replenishments during the selling season advance purchase discounts allow for intermediate allocations of inventory risk the retailer bears the risk on inventory ordered before the season while the supplier bears the risk on any production in excess of that amount this research studies how the allocation of inventory risk via these three types of wholesale price contracts impacts supply chain efficiency the ratio of the supply chain s profit to its maximum profit it is found that the efficiency of a single wholesale price contract is considerably higher than previously thought as long as firms consider both push and pull contracts in other words the literature has exaggerated the value of implementing coordinating contracts i e contracts that achieve 100 efficiency such as buy backs or revenue sharing because coordinating contracts are compared against an inappropriate benchmark often just a push contract furthermore if firms also consider advance purchase discounts which are also simple to administer then the coordination of the supply chain and the arbitrary allocation of its profit is possible several limitations of advance purchase discounts are discussed

optimal flexibility configurations in newsvendor networks going beyond chaining and pairing we study the classical problem of capacity and flexible technology selection with a newsvendor network model of resource portfolio investment the resources differ by their level of flexibility where level k flexibility refers to the ability to process k different product types we present an exact set theoretic methodology to analyze newsvendor networks with multiple products and parallel resources this simple approach is sufficiently powerful to prove that i flexibility exhibits decreasing returns and ii the optimal portfolio will invest in at most two adjacent levels of flexibility in symmetric systems and to characterize iii the optimal flexibility configuration for asymmetric systems as well the optimal flexibility configuration can serve as a theoretical performance benchmark for other configurations suggested in the literature for example although chaining is not optimal in our setting the gap is small and the inclusion of scale economies quickly favors chaining over pairing we also demonstrate how this methodology can be applied to other settings such as product substitution and queuing systems with parameter uncertainty

a new decision rule for lateral transshipments in inventory systems this paper deals with a single echelon inventory system consisting of a number of parallel local warehouses facing compound poisson demand there are standard holding and backorder costs as well as ordering costs at all warehouses normally the warehouses replenish from an outside supplier however lateral transshipments between the warehouses are also possible such transshipments take no time but incur additional costs when a demand occurs at a warehouse the question is whether the whole demand or part of it should be covered by a lateral transshipment from another warehouse given a set of alternative decisions our decision rule minimizes the expected costs under the assumption that no further transshipments will take place this rule is then used repeatedly as a heuristic a simulation study illustrates how the suggested technique performs under different conditions

conditions that cause risk pooling to increase inventory abstract we say product a is a partial substitute for product b if a fraction of the customers who prefer b are willing to accept a when b is out of stock when demand is uncertain it is intuitive and true that a larger willing to substitute fraction implies larger expected profits a higher willing to substitute fraction allows one to pool the risk of individual products it may also be intuitive that a larger willing to substitute fraction might result in lower optimal total inventory for the full substitution structure several researchers have shown that for certain distributions such as the exponential this latter intuition is not true we show that this full substitution anomaly can occur with any right skewed demand distribution we assume i i d demand distributions unless we indicate otherwise we also show that the anomaly can occur for a number of realistic situations of partial substitution with commonly used demand distributions such as normal exponential poisson and uniform we also demonstrate the anomaly for more than one period with backlogging lost sales more than two products and with setup costs

the low skill trap recently it has become popular to argue that certain workers have fallen into a trap in which they have poor skills few job opportunities and a low return on training while others have not this paper demonstrates how such a trap can occur within a simple matching model with rent sharing rent sharing diminishes the worker s incentive to acquire skills however since firms also benefit from training rent sharing likewise induces job creation the subsequent improved matching prospects may offset the initial disincentive to invest however for this mechanism to be effective firms and workers must coordinate their actions if they do not the trap occurs

vertical control of price and inventory this paper offers a simple approach to the theory of decentralizing inventory and pricing decisions along a supply chain we consider an upstream manufacturer selling to two outlets which compete as differentiated duopolists and face uncertain demand demand spillovers between the outlets arise in the event of stockouts the price mechanism in which each outlet pays a two part price and chooses price and inventory virtually never coordinates incentives efficiently contracts that can elicit first best decisions include resale price floors or buy back policies retailer held options to sell inventory back to the manufacturers

enhanced lateral transshipments in a multi location inventory system in managing an inventory network two approaches to the pooling of stock have been proposed reactive transshipments respond to shortages at a location by moving inventory from elsewhere within the network while proactive stock redistribution seeks to minimize the chance of future stockouts this paper is the first to propose an enhanced reactive approach in which individual transshipments are viewed as an opportunity for proactive stock redistribution we adopt a quasi myopic approach to the development of a strongly performing enhanced reactive transshipment policy in comparison to a purely reactive approach to transshipment service levels are improved while a reduction in safety stock levels is achieved the aggregate costs incurred in managing the system are significantly reduced especially so for large networks moreover an optimal policy is determined for small networks and it is shown that the enhanced reactive policy substantially closes the gap to optimality

endogenous inequality in integrated labor markets with two sided search we consider a market with red and green workers where labels are payoff irrelevant workers may acquire skills skilled workers search for vacancies while firms search for workers a unique symmetric equilibrium exists in which color is irrelevant there are also asymmetric equilibria in which firms search only for green workers more green than red workers acquire skills skilled green workers receive higher wages and the unemployment rate is higher among skilled red workers discrimination between ex ante identical individuals arises in equilibrium and yet firms have perfect information about their workers and strictly prefer to hire minority workers

on the effect of demand randomness on inventories and costs we explore analytically cardinal effects of the extent of demand randomness on optimal inventory levels and the associated expected costs to model changes in demand randomness we make extensive use of a mean preserving transformation commonly used in probabilistic microeconomics as well as the notion of risk pooling aggregating independent demands for the single period news vendor model the order quantity and associated costs are shown to depend on the randomness parameter in a simple and highly interpretable manner we show by a simple example that in some situations risk pooling might neither reduce inventories nor move them closer to the mean or median demand the managerial relevance of such analyses is discussed

search theoretic models of the labor market a survey we survey the literature on search theoretic models of the labor market we show how this approach addresses many issues including the following why do workers sometimes choose to remain unemployed what determines the lengths of employment and unemployment spells how can there simultaneously exist unemployed workers and unfilled vacancies what determines aggregate unemployment and vacancies how can homogeneous workers earn different wages what are the tradeoffs firms face from different wages how do wages and turnover interact what determines efficient turnover we discuss various modeling choices concerning wage determination and the meeting process including recent models of directed search

barter and monetary exchange under private information the authors develop a model of production and exchange with uncertainty concerning the quality of commodities and study the role of fiat money in ameliorating frictions caused by private information the model is specified so that without private information only high quality commodities are produced and there is no welfare gain from using money with private information there can be equilibria and sometimes multiple equilibria where low quality commodities are produced and money can increase welfare money works by promoting useful production and exchange in efficient monetary equilibria agents adopt strategies that increase the probability of acquiring high quality output copyright 1994 by american economic association

call center outsourcing contract analysis and choice this paper considers a call center outsourcing contract analysis and choice problem faced by a contractor and a service provider the service provider receives an uncertain call volume over multiple periods and is considering outsourcing all or part of these calls to a contractor each call brings in a fixed revenue to the service provider answering calls requires having service capacity thus implicit in the outsourcing decision is a capacity decision insufficient capacity implies that calls cannot be answered which in turn means there will be a revenue loss faced with a choice between a volume based and a capacity based contract offered by a contractor that has pricing power the service provider determines optimal capacity levels the optimal price and capacity of the contractor together with the optimal capacity of the service provider determine optimal profits of each party under the two contracts being considered this paper characterizes optimal capacity levels and partially characterizes optimal pricing decisions under each contract the impact of demand variability and the economic parameters on contract choice are explored through numerical examples it is shown that no contract type is universally preferred and that operating environments as well as cost revenue structures have an important effect

resource flexibility with responsive pricing this article studies two types of flexibility used by firms to better respond to uncertain market conditions resource flexibility and responsive pricing we consider a situation in which a single flexible resource can be used to satisfy two distinct demand classes while the resource capacity must be decided based on uncertain demand functions the resource allocation as well as the pricing decision are made based on the realized demand functions we characterize the effects of two key drivers of flexibility demand variability and demand correlation assuming normally distributed demand curve intercepts demand variability creates opportunity costs and with fixed prices decreases the firm s profit we show that with the additional flexibility gained from responsive pricing the firm can maximize the benefits of favorable demand conditions and mitigate the effects of poor demand conditions ultimately profiting from variability positive demand correlation on the other hand remains undesirable under responsive pricing the optimal capacity of the flexible resource is always increasing in both demand variability and demand correlation this contrasts with the scenarios based on fixed prices highlighting the crucial difference that responsive pricing makes in the management of flexible resources we further quantify the value of flexibility for the firm and its customers by considering as a benchmark a firm relying on two dedicated resources the value of flexibility is most significant if the demand levels are highly variable and negatively correlated in such cases the firm benefits from demand variability due to responsive pricing while facing limited demand risk due to resource flexibility finally we endogenize the input price of the flexible resource by considering the pricing decision of the resource supplier

repeated newsvendor game with transshipments under dual allocations abstract we study a repeated newsvendor game with transshipments in every period n retailers face a stochastic demand for an identical product and independently place their inventory orders before demand realization after observing the actual demand each retailer decides how much of her leftover inventory or unsatisfied demand she wants to share with the other retailers residual inventories are then transshipped in order to meet residual demands and dual allocations are used to distribute residual profit unsold inventories are salvaged at the end of the period while in a single shot game retailers in an equilibrium withhold their residuals we show that it is a subgame perfect nash equilibrium for the retailers to share all of the residuals when the discount factor is large enough and the game is repeated infinitely many times we also study asymptotic behavior of the retailers order quantities and discount factors when n is large finally we provide conditions under which a system optimal solution can be achieved in a game with n retailers and develop a contract for achieving a system optimal outcome when these conditions are not satisfied

a three stage model for a decentralized distribution system of retailers we present and study a three stage model of a decentralized distribution system consisting ofn retailers each of whom faces a stochastic demand for an identical product in the first stage before the demand is realized each retailer independently orders her initial inventory in the second stage after the demand is realized each retailer decides how much of her residual supply demand she wants to share with the other retailers in the third stage residual inventories are transshipped to meet residual demands and an additional profit is allocated our model is an extension of the two stage model of anupindi et al abz 2001 which implicitly assumes that all residuals enter the transshipment stage we show however that allocation rules in the third stage based on dual solutions which were used in the abz model may induce the retailers to hold back some of their residual supply demand in general we study the effect of implementing various allocations rules in the third stage on the values of the residual supply demand the retailers are willing to share with others in the second stage and the trade off involved in achieving an optimal solution for the corresponding centralized system

matching with interviews abstract this paper explores how interviews affect the matching process when worker productivity is private information wages are determined by a single round of strategic bargaining after the worker is interviewed the implications of this hiring process for the efficiency of matching and the incidence and severity of statistical discrimination are considered the better are firms at identifying productive workers the worse the average quality of the unemployment pool so interviewing tends to slow down matching for every one multiple pareto rankable equilibria are possible such that any social group in a bad equilibrium faces stricter hiring standards longer spells of unemployment and lower welfare

who benefits from transshipment exogenous vs endogenous wholesale prices this paper studies how transshipments affect manufacturers and retailers considering both exogenous and endogenous wholesale prices for a distribution system where a single manufacturer sells to multiple identical cost retailers we consider both the manufacturer being a price taker and the manufacturer being a price setter in a single period setup under multivariate normal demand distribution in the case of the manufacturer being a price taker we provide several analytical results regarding the effects of key parameters on order quantities and profits in the case of the manufacturer being a price setter we characterize the stackelberg game that arises and provide several insights into how the game dynamics are affected by transshipments specifically we find that risk pooling makes retailers order quantities less sensitive to the wholesale price set by the manufacturer hence in general the manufacturer benefits from retailers transshipments by charging a higher wholesale price while retailers are often worse off the paper captures the effect of demand correlation and the effect of the number of retailers throughout and it illustrates the findings by a numerical example we also provide an interactive web page for numerical experiments

why is automobile insurance in philadelphia so damn expensive the authors document and attempt to explain the observation that automobile insurance premiums vary dramatically across cities the authors argue that high premiums can be attributed at least in part to large numbers of uninsured motorists in some markets while uninsured motorists can be attributed to high premiums the authors construct a simple noncooperative equilibrium model that can generate inefficient equilibria with uninsured drivers and high yet actuarially fair premiums for certain parameterizations an efficient full insurance equilibrium and inefficient high price equilibria with uninsured drivers exist simultaneously helping to explain price variability across otherwise similar cities policy implications are discussed

will affirmative action policies eliminate negative stereotypes a key question concerning affirmative action is whether the labor market gains it brings to minorities can continue without it becoming a permanent fixture in the labor market the authors argue that this depends on how the policy affects employers beliefs about the productivity of minority workers they study the joint determination of employer beliefs and worker productivity in a model of statistical discrimination in job assignments the authors prove that even when identifiable groups are equally endowed ex ante affirmative action can bring about a situation in which employers correctly perceive the groups to be unequally productive ex post copyright 1993 by american economic association

problems with integrating corporate and personal income taxes in an open economy abstract this paper analyzes income tax integration in a small open economy when agents exploit all legal tax arbitrage opportunities the analysis shows that integration does not accomplish the objectives that have been attributed to it instead of eliminating the double taxation of equity income it simply removes the primary taxation of savings done through the corporation the analysis has implications for the choice of a personal tax base and for the design of the corporate tax

marriage and class here we consider a matching model where agents are heterogeneous and utilities nontransferable we utilize this framework to study how equilibrium sorting takes place in marriage markets we impose conditions that guarantee the existence of a steady state equilibrium and then characterize it several examples are developed to illustrate the richness of equilibria the model reveals an interesting sorting externality that can support multiple steady state equilibria even with constant returns to matching excerpt

entry timing in a secondary market when to trade abstract in volatile long lead time and short selling season markets a secondary market enables buyers to update their inventory during the selling season the decision of when to update involves complicated trade offs between forecast accuracy expected lost sales and average purchasing cost we use a two stage inventory replenishment model to identify the optimal trading time across different scenarios across most scenarios the optimal trading time is around the midpoint of the season and is sensitive to the expected profit margin and demand forecast errors we discuss the impacts of the timing decision on upstream suppliers sales and channel performance in terms of sales revenue and supply demand mismatch costs specifically secondary market trading always reduces upstream suppliers sales no matter when trading occurs but trading at an optimal time can maximize a secondary market s profit gain over the no trade scenario through reducing supply demand mismatch

a matching model with endogenous skill requirements we consider a labor market in which workers differ in their abilities and jobs differ in their skill requirements the distribution of worker abilities is exogenous but we model the choice of skill requirements by firms high skill jobs produce more output than low skill jobs but high skill jobs require high skill workers and thus are more difficult to fill we use a matching model together with a nash bargaining approach to wage setting to determine the equilibrium mix of job types along with the equilibrium relationship between worker and job characteristics wages and unemployment

transfer of newsvendor inventory and supply risks to sub industry and the public by financial instruments abstract we consider a two stage newsvendor model of a sub industry in which suppliers have short lead time capacity to produce goods for retailers that are selling non identical products we argue that the inventory and supply risks of the newsvendors due to demand uncertainty can be pooled and shared among different supply chains by treating reserved capacity as commodities and trading them as futures and options on futures to hedge the risks the risks will be further shared with and transferred to the public if speculators are allowed to play the game we show that this new mechanism of combining operational and financial risk hedging strategies offers industries a new way to more efficiently meet demand and improve profit

matching with noise and the acceptance curse abstract this paper explores matching with both search and information frictions specifically everyone observes only a noisy signal of the true type of any potential mate in this context matching decisions must incorporate not only information about a partner s attribute conveyed by the noisy signal but also as in the winner s curse in auction theory information about a partner s type contained in his or her acceptance decision we show that there exists an equilibrium exhibiting a stochastic positive assorting of types generalizing becker j polit economy 81 1973 813 846 in equilibrium selection is adverse being accepted reduces an agent s estimate of a potential partner s type a phenomenon that we call the acceptance curse effect

statistical discrimination with employment criteria this paper develops the theory of statistical discrimination in the form of unequal employment criteria and interviews workers differ by imperfectly observed quit rate profit maximization leads firms to set stricter employment criteria or interview fewer workers from the group with a greater proportion of high quit rate workers the theory can explain unemployment differences between groups and the total exclusion of a group from a labor market although statistical discrimination constitutes economic discrimination according to a criterion of harm to a group it may or may not be efficient because of the presence of externalities copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

transshipment and its impact on supply chain members performance this note extends some of the key results of dong and rudi 2004 to general demand distributions this generalization is achieved in two steps first we build on the analysis of dong and rudi to demonstrate that an inventory problem with transshipment is equivalent to a newsvendor problem with an adjusted demand then we study the impact of transshipment by comparing the adjusted demand with the original demand in addition to extending the results in the existing literature this note presents a novel approach for analyzing the impact of risk pooling

using scheduled ordering to improve the performance of distribution supply chains we study a supply chain with one supplier and many retailers that face exogenous end customer demands the supplier and the retailers all try to minimize their own inventory related costs in contrast to the retailers newsvendor type ordering behavior under which retailers may place orders freely in every period we propose two scheduled ordering policies the scheduled balanced ordering policy sbop and the scheduled synchronized ordering policy ssop under both the sbop and ssop retailers are allowed to order freely only in one period of an ordering cycle and receive fixed shipments in other periods retailers take turns to order freely under the sbop while under the ssop all retailers order freely in the same period with the average supply chain cost per period as the performance measure we identify mathematical conditions under which scheduled ordering policies outperform the newsvendor type ordering through a large scale numerical study we find that scheduled ordering policies are most effective when i the supplier s holding and expediting costs are high and the retailer s backorder cost is small ii the end customer demand variance and correlation are high and iii the supplier s capacity is high in addition we observe that the behavior of the ssop often complements that of the sbop whereas the sbop is better than ssop when the supplier s capacity is low and when the end customer demand correlation level is high the ssop is better when the opposite conditions prevail

does job testing harm minority workers evidence from retail establishments because minorities typically fare poorly on standardized tests job testing is thought to pose an equality efficiency trade off testing improves selection but reduces minority hiring we develop a conceptual framework to assess when this trade off is likely to apply and evaluate the evidence for such a trade off using hiring and productivity data from a national retail firm whose 1 363 stores switched from informal to test based worker screening over the course of one year we document that testing yielded more productive hires at this firm raising mean and median tenure by 10 or more consistent with prior research minorities performed worse on the test yet testing had no measurable impact on minority hiring and productivity gains were uniformly large among minority and nonminority hires these results suggest that job testing raised the precision of screening without introducing additional negative information about minority applicants most plausibly because both the job test and the informal screen that preceded it were unbiased

multi location transshipment problem with capacitated production abstract we consider coordination among stocking locations through replenishment strategies that explicitly take into account lateral transshipments i e transfer of a product among locations at the same echelon level our basic contribution is the incorporation of supply capacity into the traditional transshipment model our goal is to analyze the impact on system behavior and on stocking locations performance of the fact that the supplier may fail to fulfill all the replenishment orders we therefore formulate the capacitated supply scenario as a network flow problem embedded in a stochastic optimization problem which is solved through a sample average approximation method we find that depending on the production capacity system behavior can vary drastically moreover in a production inventory system we find evidence that either capacity flexibility i e extra production or transshipment flexibility i e pooling is required to maintain a desired level of service

process innovation product differentiation and channel structure strategic incentives in a duopoly in this paper we analyze the joint implications of two effects a inserting independent profit maximizing retailers into thechannel system provides buffering to the manufacturers from price competition when their products are highly substitutable and intrachannel contracts are observable as shown by mcguire and staelin 1983 under the assumption of constant marginal production costs and b lack of channel coordination results in a reduction in manufacturer s incentives to invest in efforts to reduce production costs as shown by jeuland and shugan 1983 for the case of bilateral monopoly we show that both these results are robust in the sense that the first holds even in the presence of the vertical externality of manufacturer s effort reduction in a noncoordinated channel and the second holds regardless of the degree of substitutability between the competing channel s products specifically we analyze a four stage game with two manufacturers and two retailers where the intrachannel contracts are linear and observable and manufacturers make investments in process improvements to reduce their production costs we find that the optimal channel structure decision depends on interactions between two parameters the degree of substitutability between products and the level of investments required to achieve production cost reduction these parameters represent what have been widely interpreted in the management literature as the two primary generic strategies that most organizations follow in order to gain competitive advantage cost leadership and product differentiation porter 1980 thus our analysis brings out the strategic and interdisciplinary nature of the channel structure decision that can significantly affect firm profitability our main results are as follows first we find that decentralized noncoordinated channels appear as more profitable equilibrium than integration or perfectly coordinated channels at high product substitutability even when process innovation dimension is accounted for in agreement with the literature however the range of substitutability over which decentralization is an equilibrium strategy is smaller the easier it is to reduce production costs intuitively the easier the cost reduction the larger the cost penalty that the channel incurs as a result of not coordinating investment and pricing decisions between channel members and thus smaller the range over which decentralization is an equilibrium this implies that there is an explicit tradeoff between efficiency and strategic incentives in distribution channel design second we show that decentralized manufacturers invest less in process innovation than integrated manufacturers do regardless of the structure of the competing channel and the degree of substitutability between products consequently a decentralized channel has higher costs charges higher prices and produces lower quantities than an integrated channel does moreover these differences get larger the easier the cost reduction the effect on manufacturer profits however is not that clear manufacturers make higher profits by decentralizing if products are highly substitutable inagreement with mcguire and staelin 1983 and coughlan and wernerfelt 1989 however we also find that the relative profitability of decentralization at high substitutability and of integration at low substitutability increases the easier the cost reduction moreover the range of substitutability over which decentralization is more profitable than integration is itself larger the easier the cost reduction though decentralization is an equilibrium strategy over a smallerrange thus process innovation accentuates the profit difference between integrated and decentralized channels andmakes the prisoner s dilemma situation worse in the choice of distribution channel structure finally we analyze two examples of coordinated decision making in a channel a divisional integrated system and franchising in the first case we find that decentralization can emerge as a unique and more profitable equilibrium at high product substitutability in contrast to mcguire and staelin 1983 in the second case we find that decentralization is not always a unique equilibrium and it is not always more profitable than integration in sharp contrast to the results by coughlan and wernerfelt 1989 thus franchising does not provide a sure way of achieving channel coordination when marginal production costs are not constant in sum this paper highlights the importance of simultaneously considering both the horizontal and the vertical dimensions of interorganizational relations on one hand and on the other paying attention to cross functional interactions across marketing and operational decisions to better understand the underlying incentives that shape firm and market structures conventional focus of marketing on demand side effects and of operations on cost side effects can lead to suboptimal decisions

pricing and matching with frictions suppose that n buyers each want one unit and m sellers each have one or more units of a good sellers post prices and then buyers choose sellers in symmetric equilibrium similar sellers all post one price and buyers randomize hence more or fewer buyers may arrive than a seller can accommodate we call this frictions we solve for prices and the endogenous matching function for finite n and m and consider the limit as n and m grow the matching function displays decreasing returns but converges to constant returns we argue that the standard matching function in the literature is misspecified and discuss implications for the beveridge curve

target market selection and marketing effort under uncertainty the selective newsvendor abstract we consider a firm that markets procures and delivers a good with a single selling season in a number of different markets the price for the good is market dependent and each market has an associated demand distribution with parameters that depend on the amount of marketing effort applied given long procurement lead times the firm must decide which markets it will serve prior to procuring the good we develop a profit maximizing model to address the firm s integrated market selection marketing effort and procurement decisions the model implicitly accounts for inventory pooling across markets which reduces safety stock costs but increases model complexity the resulting model is a nonlinear integer optimization problem for which we develop specialized solution methods for the case in which budget constraints exist we provide a novel solution approach that uses a tailored branch and bound algorithm our approach solves a broad range of 3000 test instances in an average of less than 2 seconds significantly outperforming a leading commercial global optimization solver

ranking unemployment duration and wages it explores the implication of one central assumption when firms receive multiple acceptable applications they hire the worker who has been unemployed for the least amount of time this assumption ranking is contrasted with the assumption of random hiring no ranking by embodying this assumption in a model of the labour market with job creation destruction and matching the joint behaviour of unemployment the distribution of unemployment durations and wages are characterized the implication that the re employment prospects of employed workers were they to become unemployed are better than those of the currently unemployed appears to have been an important feature of european unemployment experience in the 1980 s this paper examines the effects of the composition of unemployment on wage determination it explores one central assumption when firms receive multiple acceptable applications they hire the worker who has been unemployed for the least amount of time we refer to this assumption as ranking and contrast it throughout to the assumption of random hiring or no ranking by embodying this assumption in a model of the labour market with job creation destruction and matching we characterize the joint behaviour of unemployment the distribution of unemployment durations and wages ranking has a number of important implications first in addition to the obvious result that the exit rate from unemployment is a decreasing function of duration we show that the effect of duration is stronger the higher the rate of unemployment second with the wage depending on the distributions of prospective unemployment durations the presence of long term unemployed per se has little effect on wages third looking at the relation between the wage and the aggregate level of unemployment and comparing ranking to the case of no ranking the wage moves less with the level of unemployment but more with the change in unemployment put simply ranking and no ranking models show exactly the same aggregate unemployment slightly different long run responses of wages to unemployment and sharply different wage dynamics the paper is organized as follows section i characterizes the matching process and derives a matching function based on an urn ball process with vacancies as urns and applications by unemployed workers as balls thus the distribution of applications per vacancy depends on aggregate unemployment and vacancies vacancies with at least one acceptable application are filled when a vacancy receives more than one acceptable application firms use a rule to choose among applicants thus the rule determines who is hired but does not affect the number of hires section ii uses this matching function in a model of the labour market with continual job creation and destruction and characterizes the equilibrium values of unemployment vacancies and hires

optimal and approximate policies in multiperiod multilocation inventory models with transshipments this paper examines the effects on the optimal ordering policy and its cost of allowing for interactions among retail outlets specifically transshipments are allowed as recourse actions occurring after demands are realized but before they must be satisfied the resultant savings in holding and shortage costs are balanced against the costs of transshipment a base stock ordering policy is optimal for this model if the final period base stock order up to point is nonnegative then it will be the base stock order up to point for all periods unfortunately it can be found analytically only for two special cases where either the cost parameters are equal at every outlet or there are only two outlets these two special cases are used to validate a heuristic solution technique employing monte carlo integration which is then compared to an easily calculated base policy in order to gauge the contribution of this model the additional savings from using this heuristic policy are significant particularly for problems with many retail outlets and low transshipment costs

inventory pooling with environmental constraints using copulas abstract pooling is a best practice in inventory management for economic objectives in this paper we investigate whether pooling stays advantageous if environmental sustainability is considered in addition to the economic performance i e we analyze whether pooling could have a negative impact on the environment and evaluate the resulting trade off between economic and environmental performance within the newsvendor framework we consider three pooling models pooling via centralized ordering physical centralization including inventory allocation to the retailers with priority allocation and transshipments in addition we include environmental constraints based on carbon emissions covering all manufacturing and logistics operations of the product we characterize the optimal policy of the pooling models with emission constraints make a detailed comparison between the models and compare them to the decentralized i e no pooling case using copulas to model the joint distribution of dependent demands we prove that the profit decreases with increasing demand dependence further if the environmental constraint is binding optimal inventory level and emissions decrease with increasing demand dependence and pooling harms the environment compared to the case of no pooling additionally we numerically evaluate the impact of copulas and characterize when the economic and environmental performance of pooling can be balanced

flexible service capacity optimal investment and the impact of demand correlation we consider a firm that provides multiple services using both specialized and flexible capacity the problem is formulated as a two stage single period stochastic program the firm invests in capacity before the actual demand is known and optimally assigns capacity to customers when demand is realized sample applications include a car rental company s use of mid sized cars to satisfy unexpectedly high demand for compact cars and an airline s use of business class seats to satisfy economy class demand we obtain an analytical solution for a particular case when services may be upgraded by one class the simple form of the solution allows us to compare the optimal capacities explicitly with a solution that does not anticipate flexibility given that demand follows a multivariate normal distribution we analytically characterize the effects of increasing demand correlation on the optimal solution for the case with two customer classes the effects of demand correlation are intuitive increasing correlation induces a shift from flexible to dedicated capacity when there are three or more classes there are also adjustments to the resources not directly affected by the correlation change as correlation rises these changes follow an alternating pattern for example if the optimal capacity of one resource rises then the optimal capacity of the adjacent resource falls these results make precise conjectures based on numerical experiments that have existed in the literature for some time

supply chain choice on the internet internet companies extensively use the practice of drop shipping where the wholesaler stocks and owns the inventory and ships products directly to customers at retailers request under the drop shipping arrangement the supply chain benefits from risk pooling because the inventory for multiple retailers is stocked at the same location the wholesalers another more traditional channel alternative on the internet is one in which retailers stock and own the inventory these two supply chain structures which predominate on the internet result in different inventory risk allocation stocking decisions and profits for channel members moreover the two channel alternatives can be combined into a dual strategy whereby the retailer uses local inventory as a primary source and relies on drop shipping as a backup we model the dual strategy as a noncooperative game among the retailers and the wholesaler analyze it and obtain insights into the structural properties of the equilibrium solution to facilitate development of recommendations for practicing managers finally we characterize situations in which each of three channels is preferable by specifying appropriate ranges of critical parameters including demand variability the number of retailers in the channel wholesale prices and transportation costs

risk pooling through physical probabilistic selling abstract this paper investigates the impacts of a new type of probabilistic selling p s where the retailer orders specific products and package some as a discounted physical probabilistic product ppp rather than merely a virtual choice we call this p s strategy as physical probabilistic selling p p s the price gap between the specific products and the probabilistic product results in demand reshape i e some customers who originally buy specific products will switch to buying the probabilistic product which decreases aggregate demand uncertainty however the price discount decreases the profit margin considering this trade off we develop a three product newsvendor model to address the question of how to set the price for the ppp and make inventory allocation decisions we prove that there are two effects under p p s namely the risk pooling effect due to demand reshape and the risk diversification effect due to inventory flexibility with demand uncertainty p p s can improve the retailer s profit at lower inventory levels with proper demand reshape induced by the optimal price discount p p s is more profitable with smaller product differentiation higher customer price sensitivity higher demand uncertainty and lower package cost with supply uncertainty we demonstrate through numerical studies that p p s is a viable strategy to combat asymmetrical supply risk that yields higher profits and service levels

pricing and operational recourse in coproduction systems coproduction systems in which multiple products are produced simultaneously in a single production run are prevalent in many industries such systems typically produce a random quantity of vertically differentiated products this product hierarchy enables the firm to fill demand for a lower quality product by converting a higher quality product in addition to the challenges presented by random yields and multiple products coproduction systems often serve multiple customer classes that differ in their product valuations furthermore the sizes of these classes are uncertain employing a utility maximizing customer model we investigate the production pricing downconversion and allocation decisions in a two class stochastic demand stochastic yield coproduction system for the single class case we establish that downconversion will not occur if prices are set optimally in contrast we show that downconversion can be optimal in the two class case even if prices are set optimally we consider the benefit of postponing certain operational decisions e g the pricing or allocation rule decisions until after uncertainties are resolved we use the term recourse to denote actions taken after uncertainties have been resolved we find that recourse pricing benefits the firm much more than either downconversion or recourse allocation do implying that recourse demand management is more valuable than recourse supply management special cases of our model include the single class and two class random yield newsvendor models