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1 – 10 of over 4000Mohit Goswami, Yash Daultani and M. Ramkumar
This paper analytically models and numerically investigates two operating levers, namely optimization of product price and optimization of product quality in the context of a…
Abstract
Purpose
This paper analytically models and numerically investigates two operating levers, namely optimization of product price and optimization of product quality in the context of a manufacturer that sells the products directly in the marketplace. The study attempts to identify how optimizing product quality and product price can fulfill a manufacturer's economic aims such as maximization of the manufacturer's profit and market demand. Anchored to the extant literature, the demand is modeled as a parametric joint multiplicative function of price and quality. Further, price is modeled as a function of product quality.
Design/methodology/approach
First, the authors evolve the analytical expression for the manufacturer's profit. Thereafter, following the mathematical principles of unconstrained optimization, the authors arrive at the conditions for optimal product quality and product price. The authors further perform numerical experiments to understand the behavior of economic dimensions such as profit and demand with respect to sensitivities associated with cost, quality and price.
Findings
The authors find that under product quality optimization, the optimal product quality is a unique solution in that a highest possible theoretical manufacturer's profit is obtained. However, in the case of product price optimization, the optimal product price is non-unique and is a function of product quality. The authors further find that in the context of functional quality-level expectations, product quality optimization as an operating lever gives a better dividend. However, in the case of higher product quality expectations, product price optimization performs better than product quality optimization. Further, several novel findings are also obtained from numerical experimentations.
Originality/value
The findings of the authors' study have implications for types of industries characterized by relatively low as well as relatively high competitive intensity. Further, as opposed to several extant studies that have often carried out joint optimization of quality and price, the authors' study is one of the first to study the impact of product price and product quality on the manufacturer's economic objective in a disparate and focused manner, thus capturing individual effects.
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Niloofar Zamani, Maryam Esmaeili and Jiang Zhang
This study aims to examine the value of the call option contract in hedging the risks in the supply chain. The decentralized supply chain without call option contract is first…
Abstract
Purpose
This study aims to examine the value of the call option contract in hedging the risks in the supply chain. The decentralized supply chain without call option contract is first studied as the criterion model for evaluations. This paper addresses several questions: What will be the optimal manufacturer’s production quantity, retailer’s ordering and pricing policies in the presence of random demand and random yield by applying the downconversion approach? How will the call option contract influence the optimal decisions for the members of the supply chain? Can the risk from randomness be divided among the members in the supply chain through the call option contract?
Design/methodology/approach
This paper considers a two-level decentralized supply chain under random yield and random demand in which the manufacturer takes advantage of the downconversion approach with two scenarios, with and without option contract. To the best of the authors’ knowledge, no article or study uses the downconversion approach in a supply chain regarding random yield and random demand. Furthermore, the paper considers pricing with option contract in the supply chain, which makes this article stands out significantly from other articles in the literature.
Findings
This study shows that the downconversion approach would reduce the risk caused by the random yield, which appears to be the appropriate method for the environmental goal of the supply chains. Moreover, adopting a call option contract can increase flexibility and mitigate risks, resulting in more expected members’ profits.
Research limitations/implications
To simplify the model, the authors assume one manufacturer and one retailer, so extending the model to consider multiple retailers instead of one retailer and inventory sharing between them would be interesting. Considering the option and exercise prices as decision variables would be important future research topics. Put option and bidirectional option contracts could be investigated in the future. Another extension is modeling asymmetry of information in supply chain.
Originality/value
This paper provides managerial insights on dealing with both demand and yield risks in a manufacturer–retailer supply chain. The manufacturer has a random yield production and produces two types of vertical products: low-end and high-end. To reduce waste caused by the random yield, the manufacturer uses a downconversion approach in which low-end products are made by converting the defective high-end products. The manufacturer purchased a shortage of high-end products from the secondary market (i.e. emergency sourcing). High-end products are sold through the retailer, and low-end products are sold directly by the manufacturer. The customer demand for high-end products in the end market is random and depends on the selling price, and the customer demand for the low-end products in the secondary market is independent and random. The retailer contracts the manufacturer with the call option to obtain high-end products to meet a random demand; in fact, by using the call option contract, the authors try to balance the risks between two members. Two scenarios of with and without call option contract are proposed. After the high-end product demand is observed, the retailer would exercise the option order quantity in the call option contract scenario and then place an instant order with the manufacturer if necessary. In each scenario, the manufacturer and the retailer make their decisions simultaneously (static game) to determine the retailer’s optimal ordering and pricing policies and the optimal production quantity of the manufacturer (Nash equilibrium) by maximizing their expected profits. Finally, the impact of the model parameters on the supply chain is expressed through numerical examples. The numerical analysis shows that the call option contract provides greater profit than the wholesale price contract.
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Hui Tao, Hang Xiong, Liangzhi You and Fan Li
Smart farming technologies (SFTs) can increase yields and reduce the environmental impacts of farming by improving the efficient use of inputs. This paper is to estimate farmers'…
Abstract
Purpose
Smart farming technologies (SFTs) can increase yields and reduce the environmental impacts of farming by improving the efficient use of inputs. This paper is to estimate farmers' preference and willingness to pay (WTP) for a well-defined SFT, smart drip irrigation (SDI) technology.
Design/methodology/approach
This study conducted a discrete choice experiment (DCE) among 1,300 maize farmers in North China to understand their WTP for various functions of SDI using mixed logit (MIXL) models.
Findings
The results show that farmers have a strong preference for SDI in general and its specific functions of smart sensing and smart control. However, farmers do not have a preference for the function of region-level agronomic planning. Farmers' preferences for different functions of SDI are heterogeneous. Their preference was significantly associated with their education, experience of being village cadres and using computers, household income and holding of land and machines. Further analysis show that farmers' WTP for functions facilitated by hardware is close to the estimated prices, whereas their WTP for functions wholly or partially facilitated by software is substantially lower than the estimated prices.
Practical implications
Findings from the empirical study lead to policy implications for enhancing the design of SFTs by integrating software and hardware and optimizing agricultural extension strategies for SFTs with digital techniques such as videos.
Originality/value
This study provides initial insights into understanding farmers' preferences and WTP for specific functions of SFTs with a DCE.
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Mingzhen Song, Lingcheng Kong and Jiaping Xie
Rapidly increasing the proportion of installed wind power capacity with zero carbon emission characteristics will help adjust the energy structure and support the realization of…
Abstract
Purpose
Rapidly increasing the proportion of installed wind power capacity with zero carbon emission characteristics will help adjust the energy structure and support the realization of carbon neutrality targets. The intermittency of wind resources and fluctuations in electricity demand has exacerbated the contradiction between power supply and demand. The time-of-use pricing and supply-side allocation of energy storage power stations will help “peak shaving and valley filling” and reduce the gap between power supply and demand. To this end, this paper constructs a decision-making model for the capacity investment of energy storage power stations under time-of-use pricing, which is intended to provide a reference for scientific decision-making on electricity prices and energy storage power station capacity.
Design/methodology/approach
Based on the research framework of time-of-use pricing, this paper constructs a profit-maximizing electricity price and capacity investment decision model of energy storage power station for flat pricing and time-of-use pricing respectively. In the process, this study considers the dual uncertain scenarios of intermittency of wind resources and random fluctuations in power demand.
Findings
(1) Investment in energy storage power stations is the optimal decision. Time-of-use pricing will reduce the optimal capacity of the energy storage power station. (2) The optimal capacity of the energy storage power station and optimal electricity price are related to factors such as the intermittency of wind resources, the unit investment cost, the price sensitivities of the demand, the proportion of time-of-use pricing and the thermal power price. (3) The carbon emission level is affected by the intermittency of wind resources, price sensitivities of the demand and the proportion of time-of-use pricing. Incentive policies can always reduce carbon emission levels.
Originality/value
This paper creatively introduced the research framework of time-of-use pricing into the capacity decision-making of energy storage power stations, and considering the influence of wind power intermittentness and power demand fluctuations, constructed the capacity investment decision model of energy storage power stations under different pricing methods, and compared the impact of pricing methods on optimal energy storage power station capacity and carbon emissions.
Highlights
Electricity pricing and capacity of energy storage power stations in an uncertain electricity market.
Investment strategy of energy storage power stations on the supply side of wind power generators.
Impact of pricing method on the investment decisions of energy storage power stations.
Impact of pricing method, energy storage investment and incentive policies on carbon emissions.
A two-stage wind power supply chain including energy storage power stations.
Electricity pricing and capacity of energy storage power stations in an uncertain electricity market.
Investment strategy of energy storage power stations on the supply side of wind power generators.
Impact of pricing method on the investment decisions of energy storage power stations.
Impact of pricing method, energy storage investment and incentive policies on carbon emissions.
A two-stage wind power supply chain including energy storage power stations.
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Leilei Shi, Xinshuai Guo, Andrea Fenu and Bing-Hong Wang
This paper applies a volume-price probability wave differential equation to propose a conceptual theory and has innovative behavioral interpretations of intraday dynamic market…
Abstract
Purpose
This paper applies a volume-price probability wave differential equation to propose a conceptual theory and has innovative behavioral interpretations of intraday dynamic market equilibrium price, in which traders' momentum, reversal and interactive behaviors play roles.
Design/methodology/approach
The authors select intraday cumulative trading volume distribution over price as revealed preferences. An equilibrium price is a price at which the corresponding cumulative trading volume achieves the maximum value. Based on the existence of the equilibrium in social finance, the authors propose a testable interacting traders' preference hypothesis without imposing the invariance criterion of rational choices. Interactively coherent preferences signify the choices subject to interactive invariance over price.
Findings
The authors find that interactive trading choices generate a constant frequency over price and intraday dynamic market equilibrium in a tug-of-war between momentum and reversal traders. The authors explain the market equilibrium through interactive, momentum and reversal traders. The intelligent interactive trading preferences are coherent and account for local dynamic market equilibrium, holistic dynamic market disequilibrium and the nonlinear and non-monotone V-shaped probability of selling over profit (BH curves).
Research limitations/implications
The authors will understand investors' behaviors and dynamic markets through more empirical execution in the future, suggesting a unified theory available in social finance.
Practical implications
The authors can apply the subjects' intelligent behaviors to artificial intelligence (AI), deep learning and financial technology.
Social implications
Understanding the behavior of interacting individuals or units will help social risk management beyond the frontiers of the financial market, such as governance in an organization, social violence in a country and COVID-19 pandemics worldwide.
Originality/value
It uncovers subjects' intelligent interactively trading behaviors.
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Bin Cao, Rameshwar Dubey and Zongwei Luo
The consumers want to purchase the target products in the right place, whereas the manufacturers want to allocate their possible products to optimal distribution channels. The…
Abstract
Purpose
The consumers want to purchase the target products in the right place, whereas the manufacturers want to allocate their possible products to optimal distribution channels. The manufacturer must know how to handle itself in this business. The study aims to examine the B2B channel decision-making with different product qualities in a non-cooperative supply chain.
Design/methodology/approach
The authors develop a B2B Manufacturer-Stackelberg game as an analytical framework, combining asymmetric preference of purchase channels choice by the consumers, a continuous quality setting of the manufacturer and differential channel structure to study the manufacturer’s product strategy and channel optimisation. By horizontal comparisons across four channel structures, product variety can be classified into the differential quality-level zone through exogenous quality intervention, and the preference of manufacturers in each quality-level zone within the structures can be ranked.
Findings
Theoretically and practically, the hybrid-channel structure should be completely neglected when the direct channel dominates the retail channel. In contrast, dual-channel structures dominate single channels irrespective of the channel power, and channel preferences between high-quality and low-quality zones are stable, whereas the preference in medium-quality zone is unstable. In addition, the supply chain system cannot achieve global Pareto improvement without any additional coordination mechanism between the manufacturer and the retailer.
Originality/value
The extended results by numerical examples suggest that the bigger the area of the medium-quality zone, the more significant the product variety of the manufacturer.
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The purpose of this study is to determine whether the fine wine market is efficient between homogeneous lots and heterogeneous lots.
Abstract
Purpose
The purpose of this study is to determine whether the fine wine market is efficient between homogeneous lots and heterogeneous lots.
Design/methodology/approach
Auction price data for homogeneous (or solid) lots of fine wines was analyzed to create price prediction models. Those models were used to predict the expected auction price for the bottles within heterogeneous lots. Lastly, models were created to explain and predict the differences between expected and realized prices for heterogenous wine lots.
Findings
The results show that large inefficiencies exist. The more complex and expensive the heterogeneous lot, the greater the discount relative to what would have been realized if the bottles had been sold individually. This discount can exceed 50% of the expected auction price.
Practical implications
Heterogeneous lots may arise as a practical requirement from the auction house. Restaurant buyers probably have little interest in such lots because of the inclusion of wines the restaurant will be unable to sell. Collectors may be uniquely positioned to benefit from this price discount.
Originality/value
These results are unique in the literature, because the price dynamics of heterogeneous (or mixed) lots of fine wines have not previously been studied.
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Abstract
Purpose
With the development of digitalization and interconnection, there is a growing need for enterprise customers to ensure the compatibility of the third-party components they are using in the manufacturing process, thus raising the integration requirements for the Industrial Internet platform and its third-party developers. Therefore, our study investigates the optimal integration decision of the Industrial Internet platform while considering its access price, the integration cost, and the net utility derived by enterprise customers from the third-party components.
Design/methodology/approach
We model a two-sided Industrial Internet platform that connects customers on the demand side to the developers on the supply side. We then explore the integration decision of the Industrial Internet platform and its important factors by solving the optimal profit function.
Findings
First, despite the high integration cost of third-party developers, the platform still chooses to integrate when enterprise customers derive high utility from the third-party components. Second, due to the compatibility effect, charging the enterprise customers a higher price may reduce the platform profits when these customers derive low utility from the third-party components. Third, the platform profits will increase along with the integration cost of third-party developers when it is low in the case where enterprise customers derive low utility from third-party components.
Originality/value
Our findings offer insightful takeaways for the Industrial Internet platform when making integration decisions.
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Mohammad Esmaeil Nazari and Zahra Assari
This study aims to solve optimal pricing and power bidding strategy problem for integrated combined heat and power (CHP) system by using a modified heuristic optimization…
Abstract
Purpose
This study aims to solve optimal pricing and power bidding strategy problem for integrated combined heat and power (CHP) system by using a modified heuristic optimization algorithm.
Design/methodology/approach
In electricity markets, generation companies compete according to their bidding parameters; therefore, optimal pricing and bidding strategy are solved. Recently, CHP units are significantly operated by generation companies to meet power and heat, simultaneously.
Findings
For validation, it is shown that profit is improved by 0.04%–48.02% for single and 0.02%–31.30% for double-sided auctions. As heat price curve is extracted, the simulation results show that when CHP system is integrated with other units results in profit increase and emission decrease by 3.04%–3.18% and 2.23%–4.13%, respectively. Also, CHP units significantly affect bidding parameters.
Originality/value
The novelties are pricing and bidding strategy of integrated CHP system is solved; local heat selling is considered in pricing and bidding strategy problem and heat price curve is extracted; the effects of CHP utilization on bidding parameters are investigated; a modified heuristic and deterministic optimization algorithm is presented.
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Qing Liu, Yun Feng and Mengxia Xu
This paper aims to investigate whether the establishment of commodity futures can effectively hedge systemic risk in the spot network, given the context of financialization in the…
Abstract
Purpose
This paper aims to investigate whether the establishment of commodity futures can effectively hedge systemic risk in the spot network, given the context of financialization in the commodity futures market.
Design/methodology/approach
Utilizing industry association data from the Chinese commodity market, the authors identify systemically important commodities based on their importance in the production process using multiple graph analysis methods. Then the authors analyze the effect of listing futures on the systemic risk in the spot market with the staggered difference-in-differences (DID) method.
Findings
The findings suggest that futures contracts help reduce systemic risks in the underlying spot network. Systemic risk for a commodity will decrease by approximately 5.7% with the introduction of each corresponding futures contract, since the hedging function of futures reduces the timing behavior of firms in the spot market. Establishing futures contracts for upstream commodities lowers systemic risks for downstream commodities. Energy commodities, such as crude oil and coal, have higher systemic importance, with the energy sector dominating systemic importance, while some chemical commodities also have considerable systemic importance. Meanwhile, the shortest transmission path for risk propagation is composed of the energy industry, chemical industry, agriculture/metal industry and final products.
Originality/value
The paper provides the following policy insights: (1) The role of futures contracts is still positive, and future contracts should be established upstream and at more systemically important nodes in the spot production chain. (2) More attention should be paid to the chemical industry chain, as some chemical commodities are systemically important but do not have corresponding futures contracts. (3) The risk source of the commodity spot market network is the energy industry, and therefore, energy-related commodities should continue to be closely monitored.
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