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

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

the benefits of advance booking discount programs model and analysis consider a retailer who sells perishable seasonal products with uncertain demand due to the short sales season and long replenishment lead times associated with such products the retailer is unable to update demand forecasts by using actual sales data generated from the early part of the season and to respond by replenishing stocks during the season to overcome this limitation we examine the case in which the retailer develops a program called the advance booking discount abd program that entices customers to commit to their orders at a discount price prior to the selling season the time between placement and fulfillment of these precommitted orders provides an opportunity for the retailer to update demand forecasts by utilizing information generated from the precommitted orders and to respond by placing a cost effective order at the beginning of the selling season in this paper we evaluate the benefits of the abd program and characterize the optimal discount price that maximizes the retailer s expected profit

single period multiproduct inventory models with substitution we study a single period multiproduct inventory problem with substitution and proportional costs and revenues we consider n products and n demand classes with full downward substitution i e excess demand for class i can be satisfied using product j for i j we first discuss a two stage profit maximization formulation for the multiproduct substitution problem we show that a greedy allocation policy is optimal we use this to write the expected profits and its first partials explicitly this in turn enables us to prove additional properties of the profit function and several interesting properties of the optimal solution in a limited computational study using two products we illustrate the benefits of solving for the optimal quantities when substitution is considered at the ordering stage over similar computations without considering substitution while ordering specifically we show that the benefits are higher with high demand variability low substitution cost low profit margins or low price to cost ratio high salvage values and similarity of products in terms of prices and costs

the effects of selling packaged goods on inventory decisions in this paper we study within a newsboy type modeling framework the common business practice of retail firms to sell products not only as independent items but also as part of multiproduct packets packaged goods our emphasis is on understanding the effects of such practices on the inventory decisions of the firm we provide insights on the resulting level of suboptimality when inventory decisions are made with demand information only on the independent items and without accounting for the demand substitution structure induced between independent items and packaged goods our stylized model studies an environment with two products that are not direct substitutes for each other sold either independently or as part of a packet that contains one unit of each we provide necessary and sufficient optimality conditions for this model and suggest an efficient numerical search for obtaining the optimal stocking levels an extensive computational study allowed us to provide insights on the nature of the optimal stocking policies the suboptimality of independent newsboy policies the effects of demand correlation among individual products and multiproduct packets and the determining role of induced substitution structure among products during stockout occasions on the profitability of the inventory system

dynamic capacity management with substitution we examine a multiperiod capacity allocation model with upgrading there are multiple product types corresponding to multiple classes of demand and the firm purchases capacity of each product before the first period within each period after demand arrives products are allocated to customers customers who arrive to find that their product has been depleted can be upgraded by at most one level we show that the optimal allocation policy is a simple two step algorithm first use any available capacity to satisfy same class demand and then upgrade customers until capacity reaches a protection limit so that in the second step the higher level capacity is rationed we show that these results hold both when all capacity is salvaged at the end of the last demand period as well as when capacity can be replenished in the latter case an order up to policy is optimal for replenishment although finding the optimal protection limits is computationally intensive we describe bounds for the optimal protection limits that take little effort to compute and can be used to effectively solve large problems using these heuristics we examine numerically the relative value of strictly optimal capacity and dynamic rationing the value of perfect demand information and the impact of demand and economic parameters on the value of optimal substitution

sources of lifetime inequality is lifetime inequality mainly due to differences across people established early in life or to differences in luck experienced over the working lifetime we answer this question within a model that features idiosyncratic shocks to human capital estimated directly from data as well as heterogeneity in ability to learn initial human capital and initial wealth we find that as of age 23 differences in initial conditions account for more of the variation in lifetime earnings lifetime wealth and lifetime utility than do differences in shocks received over the working lifetime jel d31 d91 j24 j31 to what degree is lifetime inequality due to differences across people established early in life as opposed to differences in luck experienced over the working lifetime among the individual differences established early in life which ones are the most important a convincing answer to these questions is of fundamental importance first and most simply an answer serves to contrast the potential importance of the myriad policies directed at modifying or at providing insurance for initial conditions e g public education against those directed at shocks over the working lifetime e g unemployment insurance second a discussion of lifetime inequality cannot go too far before discussing which specific type of initial condition is the most critical for determining how one fares in life third a useful framework for answering these questions should also be central in the analysis of a wide range of policies considered in macroeconomics public finance and labor economics we view lifetime inequality through the lens of a risky human capital model agents differ in terms of three initial conditions initial human capital learning ability and financial wealth initial human capital can be viewed as controlling the intercept of an agent s mean earnings profile whereas learning ability acts to rotate

approximate dynamic programming for lateral transshipment problems in multi location inventory systems abstract companies commonly allocate their inventories across multiple locations based on their historical sales rates however random fluctuations in customer purchases such as those caused by weather conditions and other external factors might cause significant deviations from expected demand leading to excess stock in some locations and stockouts in others to fix this mismatch companies often turn to lateral transshipments e g the movement of stock between locations of the same echelon in this paper we examine multi location inventory systems under periodic review with multiple opportunities for proactive transshipments within one order cycle if stockouts occur demand is lost with no opportunity to backorder the objective of our model is to find an optimal policy that indicates the sources and the destinations of transshipments as well as the number of units to maximise the profit of the network we create a dynamic program that can in principal be solved to optimality using bellman s equation however the size of the state and decision spaces makes it impossible to find the optimal policy for real world sized problem instances thereby we use forward approximate dynamic programming to find a near optimal transshipment policy finally we conduct an extensive numerical study to gauge the performance of our transshipment policy for small size instances we compare our policy to the optimal one for larger scale instances we consider other practically oriented heuristics our numerical experiments show that our proposed algorithm performs very well compared to state of the art methods in the literature

joint inventory allocation and pricing decisions for perishable products abstract we jointly determine the price and the inventory allocation for a perishable product with a predetermined lifetime we assume that the price of the product increases as the time when it perishes approaches as in the airline industry demand for the product is price sensitive to maximize the expected revenue we developed a discrete time dynamic programming model to obtain the optimal prices and the optimal inventory allocations for the product with a two period lifetime we then proposed three heuristics when the lifetime is longer than two periods the computational results showed that the expected revenues from the proposed heuristics were very close to that of the optimal solution we extended these results to i the case where the price for the product consistently decreases and ii the case where the price for the product first increases and later decreases

optimal timing problems in environmental economics abstract because of the uncertainties and irreversibilities that are often inherent in environmental degradation its prevention and its economic consequences environmental policy design can involve important problems of timing i use a simple two period model to illustrate these optimal timing problems and their implications for environmental policy i then lay out and solve a continuous time model of policy adoption in which the policy itself entails sunk costs and environmental damage is irreversible the model generalizes earlier work in that it includes two stochastic state variables one captures uncertainty over environmental change and the other captures uncertainty over the social costs of environmental damage solutions of the model are used to show the implications of these two types of uncertainty for the timing of policy adoption

human capital values and returns bounds implied by earnings and asset returns data abstract we provide theory for calculating bounds on both the value of an individual s human capital and the return on an individual s human capital given knowledge of the process governing earnings and financial asset returns we calculate bounds using u s data on male earnings and financial asset returns the large idiosyncratic component of earnings risk implies that bounds on values and returns are quite loose however when aggregate shocks are the only source of earnings risk both bounds are tight

agglomeration and competitiveness from marshall to chinitz chinitz like marshall is better known as a seminal theorist of the urban supply side than for his useful insights on continental economic regeneration this paper draws on both themes in chinitz s work assuming that the us trade deficit is a fiscal outcome the question remains as to why some us industries flourish while others fail the literature since 1988 emphasises the role of urban industrial clusters in nurturing globally competitive industries but route 128 s fall suggests limits to this view the alternative theme is that continentality 1 provides a menu of economic cultures and 2 generates feedback to demature declining older regions enter europe s 1992 more generally world development in the 1990s is seen as being led by three continental systems including east asia and operating via the dance of continents and regions now the primal economic constructs

an evaluation of competitive industrial structure and regional manufacturing employment change drucker j an evaluation of competitive industrial structure and regional manufacturing employment change regional studies this paper examines the relationship between regional industrial structure and employment change in the manufacturing sector and nineteen subsectors in the united states from 1987 to 1997 the relative associations of economic diversity industrial specialization and competitive structure with economic performance are assessed using a non causal regression framework multiple facets of industrial structure at the regional scale including competitive structure are considered together by exploiting confidential microdata to construct and evaluate detailed metrics across broad geographic and industrial ranges the findings suggest the importance of industrial competitive structure for understanding regional employment change economic performance and industrial development

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

trade reduction vs multi stage a comparison of double auction design approaches with the growth of electronic markets designing double auction mechanisms that are applicable to emerging market structures has become an important research topic in this paper we investigate two truthful double auction design approaches the trade reduction approach and the multi stage design approach and compare their resulting mechanisms in various exchange environments we find that comparing with the trade reduction approach the multi stage design approach offers mechanisms applicable to more complicated exchange environments furthermore for the known trade reduction mechanisms we prove that the corresponding mechanisms under the multi stage design approach are superior in terms of both social efficiency and individual payoffs in each exchange environment of interest our computational tests show that the mechanisms under the multi stage design approach achieve very high efficiency in various scenarios

a heuristic joint replinishment policy for the case of heterogeneity among items abstract the q s s policy is considered among the best for solving the well known stochastic joint replenishment problem however it has some shortcomings if much heterogeneity exists among the items consequently a new heuristic control policy is constructed the cornerstone is a policy iteration improvement step assuming a single possibility for making a joint order and thus to deviate from the rule that the items are governed by independent re order and order up to s s policies but this policy iteration improvement step is done repeatedly at each demand epoch it is only required the development of one dimensional value functions of state variables in order to accomplish the policy iteration improvement step knowledge about good order up to values is important furthermore a relaxation parameter is introduced such that one can make it easier or more difficult to issue a joint order when following the policy iteration improvement step finally in case a joint order is made a vector of can order points is used to include additional items the policy is denoted a c s policy numerical results shows that the new policy performs significantly better than the q s s policy for cases with heterogeneity among items furthermore from a given optimal can order policy one can construct a better c s policy

optimal joint inventory and transshipment control under uncertain capacity in this paper we address the optimal joint control of inventory and transshipment for a firm that produces in two locations and faces capacity uncertainty capacity uncertainty e g due to downtime quality problems yield etc is a common feature of many production systems but its effects have not been explored in the context of a firm that has multiple production facilities we first characterize the optimal production and transshipment policies and show that uncertain capacity leads the firm to ration the inventory that is available for transshipment to the other location and characterize the structure of this rationing policy then we characterize the optimal production policies at both locations which are defined by state dependent produce up to thresholds we also describe sensitivity of the optimal production and transshipment policies to problem parameters and in particular explain how uncertain capacity can lead to counterintuitive behavior such as produce up to limits decreasing for locations that face stochastically higher demand we finally explore through a numerical study when the optimal policy is most likely to yield significant benefits compared to simple policies

the multiperiod multilocation inventory problem this paper studies the structure of optimal policies in general multiperiod multilocation inventory problems with proportional costs it is shown that the multiperiod problem has the same generic form in each period as a one period problem hence properties of the one period problem are inherited by the multiperiod formulation in particular the form of the optimal policy can be characterized in the special case of a leontief system structure and for a somewhat more general class it is shown that base stock policies are optimal for certain initial states for the stationary problem some results are derived about the monotonicity of the sequence of base stock vectors

managing inventories with one way substitution a newsvendor analysis abstract this paper presents an insightful approach to analyze two item periodic inventory systems with one way substitution the objective is to minimize the expected total cost per period which consists of expected purchasing costs expected inventory holding costs expected shortage costs and expected adjustment costs this approach helps derive the optimality conditions in both single period and infinite horizon settings and yields useful insights into the impact of substitution on the service level the optimality of a borderline case in which the order up to level of the inflexible item is reduced to zero and the pivotal role of the purchasing cost

approximations of dynamic multilocation production and inventory problems consider a central depot or plant which supplies several locations experiencing random demands orders are placed or production is initiated periodically by the depot the order arrives after a fixed lead time and is then allocated among the several locations the depot itself does not hold inventory the allocations are finally received at the demand points after another lag unfilled demand at each location is backordered linear costs are incurred at each location for holding inventory and for backorders also costs are assessed for orders placed by the depot the object is to minimize the expected total cost of the system over a finite number of time periods this system gives rise to a dynamic program with a state space of very large dimension we show that this model can be systematically approximated by a single location inventory problem all the qualitative and quantitative results for such problems can then be applied

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

estimating demand by using sales information inaccuracies encountered abstract demand data is integral to a company s overall information requirement this is particularly true for manufacturers and retailers with regard to capacity production and inventory planning notwithstanding the implicit inaccuracies encountered companies are predisposed to employ sales data as a primary source of information for estimating future demand in this paper by adopting a two product setting we measure inventory cost inaccuracies that arise from using sales data in estimating demand by analyzing these costs we also explore the conditions under which the resulting inaccuracies are either lessened or become acute in this context the determining rule of an induced substitution structure between the two products during stockout occasions is explicitly analyzed we use a newsboy framework in a two product environment wherein one product may be taken as a direct substitute for the other we provide necessary and sufficient optimality conditions and an extensive computational study to illustrate and support our findings and to provide additional insights on the conditions characterizing optimal stocking policies

long waves and uneven regional growth in recent years the phenomenon of uneven economic growth between different regions of the country has received increasing attention in the academic literature 16 17 20 27 the conventional explanation of uneven growth centers on disparities between regions in such things as unionization labor costs local taxes energy costs climate extent of local government regulation the availability of technology and access to markets the purpose of the present paper is to suggest that uneven regional development is a manifestation of regional long waves of economic growth and decline and that disparities between regions in such things as unionization labor costs and taxes are simply the result of different regions being at different phases of development in their respective long waves the essence of the view to be presented in the following pages is that regions experience long periods of sustained rapid economic growth followed by relatively lengthy periods of slow economic growth or economic decline the growth retardation stage of the long wave sets up the conditions for an eventual economic recovery and a return to a more rapid rate of growth the first section of the paper will be devoted to presenting the theoretical underpinnings of regional long waves supporting empirical evidence will be provided in the second section

investment timing and learning externalities abstract we study a duopoly model of investment in which each player learns about the quality of a common value project by observing some public background information and possibly the experience of his rival investment costs are private information and the background signal takes the form of a poisson process conditional on the quality of the project being low the resulting attrition game has a unique symmetric equilibrium which depends on initial public beliefs we determine the impact of changes in the cost and signal distributions on investment timing and how equilibrium is affected when a first mover advantage is introduced

dynamic capacity management with general upgrading this paper studies a capacity management problem with upgrading a firm needs to procure multiple classes of capacities and then allocate the capacities to satisfy multiple classes of customers that arrive over time a general upgrading rule is considered i e unmet demand can be satisfied using multistep upgrade no replenishment is allowed and the firm has to make the allocation decisions without observing future demand we first characterize the structure of the optimal allocation policy which consists of parallel allocation and then sequential rationing specifically the firm first uses capacity to satisfy the same class demand as much as possible then considers possible upgrading decisions in a sequential manner we also propose a heuristic based on certainty equivalence control to solve the problem numerical analysis shows that the heuristic is fast and delivers close to optimal profit for the firm finally we conduct extensive numerical studies to derive insights into the problem it is foun

a test of the household income process using consumption and wealth data the evolution of household income can be explained almost equally well by rival models however rival models have very different implications for other household behaviours such as consumption i therefore test between two prominent models in the uk using panel data on consumption and wealth as well as income over 1991 2006 to operate the test i show that long lived income shocks transmit far less than one for one through to consumption and particularly so for younger households i then compare these estimates of transmission with estimates of households ability to smooth shocks captured by the data on wealth conditional on the suitability of the consumption model my estimates provide evidence against the restricted income process rip and in favour of an alternative heterogeneous income process hip this finding also explains why cross sectional consumption inequality grew slowly over the period even though the variance of long lived shocks was high finally i conclude that it is important to consider mean reversion of shocks when constructing life cycle consumption models

analysis of postponement strategy for perishable items by eoq based models abstract this paper develops economic order quantity model eoq based models with perishable items to evaluate the impact of a form postponement strategy on the retailer in a supply chain we formulate models for a postponement system and an independent system to minimize the total average cost function per unit time for ordering and keeping n perishable end products an algorithm is given to derive the optimal solutions of the proposed models the impact of the deterioration rate on the inventory replenishment policies is studied with the help of theoretical analysis and numerical examples our theoretical analysis and computational results show that a postponement strategy for perishable items can give a lower total average cost under certain circumstances

optimal policies for inventory systems with lateral transshipments using lateral transshipments can be beneficial in order to improve service levels and to reduce system costs this paper deals with a single echelon inventory system with two identical locations demands are generated by stationary and independent poisson processes in general if a demand occurs at a location and there is no stock on hand the demand is assumed to be backordered or lost however in this paper lateral transshipments serve as an emergency supply in case of stock out in this paper the rule for lateral transshipments is given while the ordering policies for normal replenishments are optimized the transshipment rule is to always transship when there is a shortage at one location and stock on hand at the other first we assume that the locations apply r q policies for normal replenishments and show that the optimal policies are not necessarily symmetric even though the locations are identical this means that one cannot in general assume that the optimal policy is symmetric under symmetric assumptions second we relax the assumption of r q policies and derive the optimal replenishment policy using stochastic dynamic programming

project management under risk using the real options approach to evaluate flexibility in r d managerial flexibility has value in the context of uncertain r d projects as management can repeatedly gather information about uncertain project and market characteristics and based on this information change its course of action this value is now well accepted and referred to as real option value we introduce in addition to the familiar real option of abandonment the option of corrective action that management can take during the project the intuition from options pricing theory is that higher uncertainty in project payoffs increases the real option value of managerial decision flexibility however r d managers face uncertainty not only in payoffs but also from many other sources we identify five example types of r d uncertainty in market payoffs project budgets product performance market requirements and project schedules how do they influence the value from managerial flexibility we find that if uncertainty is resolved or costs revenues occurafter all decisions have been made more variability may smear out contingencies and thus reduce the value of flexibility in addition variability may reduce the probability of flexibility ever being exercised which also reduces its value this result runs counter to established option pricing theory intuition and contributes to a better risk management in r d projects our model builds intuition for r d managers as to when it is and when it is not worthwhile to delay commitments for example by postponing a design freeze thus maintaining flexibility in r d projects

consumption and risk sharing over the life cycle a striking feature of u s data on income and consumption is that inequality increases with age this paper asks if individual specific earnings risk can provide a coherent explanation we find that it can we construct an overlapping generations general equilibrium model in which households face uninsurable earnings shocks over the course of their lifetimes earnings inequality is exogenous and is calibrated to match data from the u s panel study on income dynamics consumption inequality is endogenous and matches well data from the u s consumer expenditure survey the total risk households face is decomposed into that realized before entering the labor market and that realized throughout the working years in welfare terms the latter is found to be more important than the former

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

beyond arbitrage good deal asset price bounds in incomplete markets one often wants to value a risky payoff by reference to prices of other assets rather than by exploiting full fledged economic models however this approach breaks down if one cannot find a perfect replicating portfolio we impose weak economic restriction to derive usefully tight bounds on asset prices in this situation the bounds assume that investors would want to buy assets with high sharpe ratios good deals as well as pure arbitrage opportunities we show how to calculate the price bounds in one period multiperiod and continuous time contexts we show that the multiperiod problem can be solved recursively as a sequence of one period problems we calculate bounds in option pricing examples including infrequent trading and an option written on a nontraded event and we use the bounds to explore the economic significance of option pricing predictions we find that much variation in s p 500 index option prices over time and across strike prices fits within the bounds

an inventory model with unidirectional lateral transshipments this paper deals with a continuous review inventory system with poisson demand in which lateral transshipments are allowed in case of a shortage at a location another location acts as a supplier if it is possible a common assumption in earlier papers is that transshipments are allowed between all locations this network configuration may however not be the best choice for many reasons one such reason is that it may be difficult to establish contracts between locations regarding the design of the transshipment policy another reason is that a system with many transshipment links is much more complex than a system with few transshipment links in this paper we study a system where transshipments are allowed only in one direction this may be a reasonable policy if the locations have very different backorder lost sales costs our approach is relatively simple and fast and works well in most cases

emergency lateral transshipments in a two location inventory system with positive transshipment leadtimes abstract we consider a single echelon continuous review inventory system for spare parts with two parallel locations each location faces independent poisson demand and backorders are allowed in this paper we consider the possibility of lateral transshipments between the locations the transshipment leadtime is positive and deterministic and there is an additional cost for making a transshipment we suggest a transshipment policy which is based on the timing of all outstanding orders and develop and solve a heuristic model by using theory and concepts from doubly stochastic poisson processes and also partial differential equations a simulation study indicates that our heuristic works very well and that the relative cost increase of disregarding the transshipment leadtime may be quite high our results also indicate that it is in general worth the effort of reducing the transshipment leadtime even if it is already relatively short

an index heuristic for transshipment decisions in multi location inventory systems based on a pairwise decomposition in multi location inventory systems transshipments are often used to improve customer service and reduce cost determining optimal transshipment policies for such systems involves a complex optimisation problem that is only tractable for systems with few locations consequently simple heuristic transshipment policies are often applied in practice this paper develops an approximate solution method which applies decomposition to reduce a markov decision process model of a multi location inventory system into a number of models involving only two locations the value functions from the subproblems are used to estimate the fair charge for the inventory provided in a transshipment this estimate of the fair charge is used as the decision criterion in a heuristic transshipment policy for the multi location system a numerical study shows that the proposed heuristic can deliver considerable cost savings compared to the simple heuristics often used in practice

transshipment of inventories among retailers myopic vs farsighted stability the author considers a model of a decentralized distribution system consisting of n retailers selling an identical product retailers face a stochastic demand and must order their initial inventory before this demand is realized after demand realization retailers decide how much of their unsold inventory or unsatisfied demand they want to share with other retailers this is followed by a transshipment of leftover inventories and distribution of the additional profit generated through inventory sharing the author addresses the following issue suppose that the retailers distribute the profit from inventory sharing according to an allocation rule that induces retailers to share their residuals in a way that maximizes the additional profit such as the shapley value but may not belong to the core is it likely that in this framework all retailers will jointly share their residuals and not form subcoalitions previous research has looked at this problem from a myopic viewpoint and concluded that the grand coalition is not stable unlike the prior work the author looks at stability in a farsighted sense that is retailers do not consider only their immediate payoffs but are also concerned with reactions of other retailers to their actions in a symmetric setting with identical additional unit revenues from transshipments generated by all retailers farsighted retailers always maximize their allocations by not defecting from the grand coalition the author also provides conditions when the same is true for nonidentical additional unit revenues

research note the role of production lead time and demand uncertainty in marketing durable goods firms often have to make their production decisions under conditions of demand uncertainty this is especially true for product categories such as automobiles and technology goods where the lead time needed for manufacturing forces firms to make production decisions well in advance of the selling season once the firm has produced the goods the available production volume affects the firm s subsequent marketing decisions in this paper we study the relationship between the firm s production and marketing decisions for a durable goods manufacturer we develop a dynamic model of a durable product market in which the demand functions are developed from a micromodeling of consumer utility functions and an equilibrium analysis of consumer strategies after taking into account the demand uncertainty as well as the potential for cannibalization of future sales the manufacturer makes its production and sales decisions we find that the firm s optimal inventory level is u shaped in the durability of the product and that the firm suffers a larger loss due to uncertainty when it is leases rather than sells its products furthermore unlike the case for nondurables for durable goods we find that the effect of uncertainty persists even after the uncertainty has been resolved