Gangshu Cai

Exclusive Channels and Revenue Sharing in a Complementary Goods Market

This paper evaluates the joint impact of exclusive channels and revenue sharing on suppliers and retailers in a hybrid duopoly common retailer and exclusive channel model. The model bridges the gap in the literature on hybrid multichannel supply chains with bilateral complementary products and services with or without revenue sharing. The analysis indicates that, without revenue sharing, the suppliers are reluctant to form exclusive deals with the retailers; thus, no equilibrium results. With revenue sharing from the retailers to the suppliers, it can be an equilibrium strategy for the suppliers and retailers to form exclusive deals. Bargaining solutions are provided to determine the revenue sharing rates. Our additional results suggest forming exclusive deals becomes less desirable for the suppliers if revenue sharing is also in place under nonexclusivity. In our extended discussion, we also study the impact of channel asymmetry, an alternative model with fencing, composite package competition, and enhanced price-dependent revenue sharing.

Optimal fences and joint price and inventory decisions in distinct markets with demand leakage

This paper evaluates the simultaneous determination of price and inventory replenishment when a firm faces demand from distinct market segments. A firm utilizes fences, such as advance or nonrefundable payment, to maintain separation of its market segments; however, fences are imperfect and allow a degree of demand leakage from the higher-priced to the lower-priced market segment. We investigate the optimal structure of joint price and inventory decisions with fencing, and demonstrate that more segments is not necessarily better, especially when demand uncertainty is high in the presence of lost sales. We also show the impact of imperfect fences on the firms profitability, and evaluate how fencing costs affect the optimal fencing decision.

Computing price trajectories in combinatorial auctions with proxy bidding

Abstract Proxy bidding has proven useful in a variety of real auction formats – most notably eBay – and has been proposed for the nascent field of combinatorial auctions. Previous work on proxy bidding in combinatorial auctions requires the auctioneer to run the auction with myopic bidders to determine the outcome. In this paper, we present a radically different approach that computes the bidders’ allocation of their attention across the bundles only at “inflection points”. Inflections are caused by the introduction of a new bundle into an agent’s demand set, a change in the set of currently competitive allocations, or the withdrawal of an agent from the set of active bidders. This approach has several advantages over alternatives, including that it computes exact solutions and is invariant to the magnitude of the bids.

A heuristic for designing manufacturing focus units with resource considerations

This paper presents a model of the plant-within-a-plant (PWP) design problem and demonstrates a heuristic for analysing the problem. Although the benefits of a manufacturing focus have been articulated in the literature, methods for implementation with consideration for resource requirements have not been developed previously. In this study, we discuss the importance of including resource considerations and propose a methodology that can help managers arrive at a facility design with a high degree of focus and minimum resource needs. A heuristic is developed that incorporates the concept of order-winning criteria and volume into the focus design. The heuristic not only recognises the effects of conflicting manufacturing tasks, but also considers resource costs and material flows between PWP units. Experimental results show that the proposed methodology offers managers the opportunity to generate and assess alternative PWP designs, which are otherwise unavailable. Overall, this research provides an analytical framework for further research in focused manufacturing.

Two-stage Tabu — Particle swarm algorithms for the facility layout problem with size constraints

The Facility Layout Problem (FLP) in this paper is an extension of the traditional Quadratic Assignment Problems (QAP). While the objective is still to minimize the summed cost of the (flow ∗ distance), the facilities in the FLP have different given sizes and their locations must be determined on a continual planar site. Based on the visual facility layout design system proposed by Chiang [13], this paper presents a study on using Tabu Search (TS), Particle Swarm Optimization (PSO) and their combinations (TS+PSO and PSO+TS) to tackle the FLP. The computation results show that the two-stage algorithms are able to achieve better results in most cases than TS and PSO individually on the FLP. The proposed two-stage algorithms and visual layout design system provide an effective tool to solve the practical FLP.

Financing Multiple Heterogeneous Suppliers in Assembly Systems: Buyer Finance vs. Bank Finance

Buyer finance has been practiced by manufacturers/assemblers for years; however, few papers have investigated the efficacy of buyer finance in an assembly system with multiple suppliers. This paper fills the literature gap by comparing buyer finance with bank finance in a supply chain with one assembler and multiple heterogeneous capital-constrained component suppliers. We characterize the equilibrium solutions for different financing schemes (i.e., buyer finance, bank finance, and no finance). We show that in buyer finance the assembler should charge the suppliers the lowest possible interest rate, which may be even below its own unit capital opportunity cost, leading to interest losses in financing suppliers. However, the assembler can benefit more from enhanced inventory backup and lower component purchasing prices resulting from the low buyer-finance interest rate. We further compare the two financing schemes from the perspectives of the assembler, the borrowing and nonborrowing suppliers, and the who...

Guarantor Financing in a Four-Party Supply Chain with Leadership Influence

This study investigates manufacturer guarantor financing (MG) and third‐party logistics (3PL) guarantor financing (LG) in a four‐party supply chain game that features a manufacturer, a 3PL, a capital‐constrained retailer, and a bank. The manufacturer or 3PL can act as the guarantor for the retailer who borrows bank credit. Two different leadership structures are investigated, namely, Nash game and manufacturer leadership Stackelberg game, where the manufacturer and 3PL decide simultaneously and sequentially, respectively. The supply chain under both leadership structures prefers guarantor financing to traditional bank financing when the supply chain is sufficiently cost‐efficient. In the Nash game, however, firms encounter a free‐rider dilemma when choosing between MG and LG, wherein both potential guarantors prefer the other to be the guarantor. This free‐rider dilemma can be resolved in the Stackelberg game. We also observe the follower–guarantor advantage in the Stackelberg game, wherein all firms favor the follower to provide guarantor financing. Our analysis shows that the supply chain under guarantor financing with a longer decision hierarchy (i.e., the Stackelberg game) can be conditionally more effective than that with a shorter one (i.e., the Nash game). By further analyzing different cost structures, pricing mechanism, and retailer’s initial capital, we find that most of our qualitative results remain accurate under more sophisticated conditions. These findings enhance our understanding of the value of guarantor financing in a capital‐constrained supply chain and the impact of leadership structure on financing decisions.

A Note On Discrete Bid First-Price Auction With General Value Distribution

This paper evaluates the discrete bid first-price sealed-bid (FPSB) auction in a model with a general value distribution. We show that a symmetric Bayesian Nash equilibrium exists for the discrete bid FPSB auction. We further prove that the discrete bid FPSB equilibrium conditionally converges to that of a continuous bid FPSB auction.

The constraints of the valuation distribution for solving a class of games by using a best response algorithm

Infinite games with incomplete information are common in practice. First-price, sealed-bid auctions are a prototypical example. To solve this kind of infinite game, a heuristic approach is to discretise the strategy spaces and enumerate to approximate the equilibrium strategies. However, an approximate algorithm might not be guaranteed to converge. This paper discusses the utilisation of a best response algorithm in solving infinite games with incomplete information. We show the constraints of the valuation distributions define the necessary conditions of the convergence of the best response algorithm for several classes of infinite games, including auctions. A salient feature of the necessary convergence conditions lies in that they can be employed to compute the exact Nash equilibria without discretising the strategy space if the best response algorithm converges.

An algorithm for computing the outcome of combinatorial auctions with proxy bidding

Proxy bidding has proved useful in a variety of real auction formats, such as eBay, and has been proposed for some combinatorial auctions. Previous work on proxy bidding in combinatorial auctions requires the auctioneer essentially run the auction with myopic bidders to determine the outcome. In addition to being computationally costly, this process is only as accurate as the bid increment, and decreasing the bid increment to improve accuracy greatly increases the running time. In this paper, we present an algorithm that computes the outcome of the proxy auction by examining only the events that cause the proxy bidders to change their behaviors. This algorithm is much faster than the alternative, and computes exact solutions.