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1 – 10 of 92The author develops a bilateral Nash bargaining model under value uncertainty and private/asymmetric information, combining ideas from axiomatic and strategic bargaining theory…
Abstract
The author develops a bilateral Nash bargaining model under value uncertainty and private/asymmetric information, combining ideas from axiomatic and strategic bargaining theory. The solution to the model leads organically to a two-tier stochastic frontier (2TSF) setup with intra-error dependence. The author presents two different statistical specifications to estimate the model, one that accounts for regressor endogeneity using copulas, the other able to identify separately the bargaining power from the private information effects at the individual level. An empirical application using a matched employer–employee data set (MEEDS) from Zambia and a second using another one from Ghana showcase the applied potential of the approach.
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This paper aims to consider the effects of a merger on technology adoption and welfare in the presence of passive cross ownership. Merger increases investments in process…
Abstract
Purpose
This paper aims to consider the effects of a merger on technology adoption and welfare in the presence of passive cross ownership. Merger increases investments in process technology and may increase welfare. The results are important for antitrust policies and suggest that the antitrust authorities may not need to be too concerned about mergers in industries with cross ownership.
Design/methodology/approach
Game-theoretic analysis.
Findings
Merger increases investments in process technology and may increase welfare.
Originality/value
To the best of the author’s knowledge, this study is original.
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Mehmet Kursat Oksuz and Sule Itir Satoglu
Disaster management and humanitarian logistics (HT) play crucial roles in large-scale events such as earthquakes, floods, hurricanes and tsunamis. Well-organized disaster response…
Abstract
Purpose
Disaster management and humanitarian logistics (HT) play crucial roles in large-scale events such as earthquakes, floods, hurricanes and tsunamis. Well-organized disaster response is crucial for effectively managing medical centres, staff allocation and casualty distribution during emergencies. To address this issue, this study aims to introduce a multi-objective stochastic programming model to enhance disaster preparedness and response, focusing on the critical first 72 h after earthquakes. The purpose is to optimize the allocation of resources, temporary medical centres and medical staff to save lives effectively.
Design/methodology/approach
This study uses stochastic programming-based dynamic modelling and a discrete-time Markov Chain to address uncertainty. The model considers potential road and hospital damage and distance limits and introduces an a-reliability level for untreated casualties. It divides the initial 72 h into four periods to capture earthquake dynamics.
Findings
Using a real case study in Istanbul’s Kartal district, the model’s effectiveness is demonstrated for earthquake scenarios. Key insights include optimal medical centre locations, required capacities, necessary medical staff and casualty allocation strategies, all vital for efficient disaster response within the critical first 72 h.
Originality/value
This study innovates by integrating stochastic programming and dynamic modelling to tackle post-disaster medical response. The use of a Markov Chain for uncertain health conditions and focus on the immediate aftermath of earthquakes offer practical value. By optimizing resource allocation amid uncertainties, the study contributes significantly to disaster management and HT research.
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Risk preferences play a critical role in almost every facet of economic activity. Experimental economists have sought to infer the risk preferences of subjects from choice…
Abstract
Risk preferences play a critical role in almost every facet of economic activity. Experimental economists have sought to infer the risk preferences of subjects from choice behavior over lotteries. To help mitigate the influence of observable, and unobservable, heterogeneity in their samples, risk preferences have been estimated at the level of the individual subject. Recent work has detailed the lack of statistical power in descriptively classifying individual subjects as conforming to Expected Utility Theory (EUT) or Rank Dependent Utility (RDU). I discuss the normative consequences of this lack of power and provide some suggestions to improve the accuracy of normative inferences about individual-level choice behavior.
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Sarin Raju, Rofin T.M., Pavan Kumar S. and Jagan Jacob
In most economies, there are rules from the market regulators or government to sell at an equal wholesale price (EWP). But when one upstream channel is facing a negative demand…
Abstract
Purpose
In most economies, there are rules from the market regulators or government to sell at an equal wholesale price (EWP). But when one upstream channel is facing a negative demand disruption and another positive, EWP can create extra pressure on the disadvantageous supply chain partner, which faces negative disruption. The purpose of this study is to analyse the impact of EWP and the scope of the discriminatory wholesale price (DWP) during disruptions.
Design/methodology/approach
For the study, the authors used a dual-channel supply chain consisting of a manufacturer, online retailer (OR) and traditional brick-and-mortar (BM) retailer. Stackelberg game is used to model the interaction between the upstream and downstream channel partners, and the horizontal Nash game to analyse the interaction within downstream channel partners. For modelling asymmetric disruption, the authors took instances from the lock-down and post-lock-down periods of the COVID-19 pandemic, where consumers flow from BM retailer to OR store.
Findings
By analysing the disruption period, the authors found that this asymmetric disruption is detrimental to the BM channel, favourable to OR and has no impact on the manufacturer. But with DWP, the authors found that the profit of the BM channel and manufacturer can be increased during disruption. Though the profit of the OR decreased, it was found to be higher than in the pre-disruption period. Under DWP, the consumer surplus increased during disruption, making it favourable for the customers also. Thus, DWP can aid in creating a win-win strategy for all the supply chain partners during asymmetric disruption. Later as an extension to the study, the authors analysed the impact of the consumer transfer factor and found that it plays a crucial role in the optimal decisions of the channel partner during DWP.
Originality/value
Very scant literature analyses the intersection of DWP and disruptions. To the best of the authors’ knowledge, this study, for the first time uses DWP as a tool to help the disadvantageous supply chain partner during asymmetric disruptions. The study findings will assist the government, market regulators and manufacturers in revamping the wholesale pricing policies and strategies to help the disadvantageous supply chain partner during asymmetric disruption.
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Bangyi Li, Juan Tang, Zhi Liu and Bengang Gong
The purpose of this paper is to investigate remanufacturing operational strategies considering uncertain quality of end-of-life (EOL) products and differential consumers’…
Abstract
Purpose
The purpose of this paper is to investigate remanufacturing operational strategies considering uncertain quality of end-of-life (EOL) products and differential consumers’ willingness-to-pay (WTP) for new products and provide suggestions on the remanufacturing mode selection for the original equipment manufacturer (OEM).
Design/methodology/approach
This study considers three remanufacturing modes, i.e. in-house, outsourcing and authorization modes. By establishing and comparing decision models of three modes from the perspectives of profit, consumer surplus and environment, the optimal remanufacturing mode is discussed.
Findings
The results suggest that if the OEM’s remanufacturing capability is high, the in-house mode brings to the highest environmental performance, OEM’s profit and consumer surplus. Otherwise, the outsourcing mode (authorization) is the best benefit to environment (consumers if the unit production cost of new products is not too high). As for the preference of two decision-makers to outsourcing and authorization modes, if the difference of consumers’ WTP for new products is low, the OEM prefers the outsourcing mode; otherwise, the OEM prefers the authorization mode. The preference of the third-party remanufacturer (TPR) to remanufacturing mode is affected by consumers’ WTP for remanufactured products, WTP difference for new products and remanufacturing quality level standard.
Practical implications
These results can provide operational insights into how to select remanufacturing mode when the quality of EOL products is uncertain and consumers’ WTP for new products is different under three remanufacturing modes.
Originality/value
This paper is among the first to investigate the joint effects of EOL products’ uncertain quality and differential consumers’ WTP for new products on the operational strategies and performance under different remanufacturing modes.
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Anannya Gogoi, Jagriti Srivastava and Rudra Sensarma
While firms in developing countries are increasingly adopting lean practices of inventory management, there is limited evidence showing the impact of lean practices on firm…
Abstract
Purpose
While firms in developing countries are increasingly adopting lean practices of inventory management, there is limited evidence showing the impact of lean practices on firm performance in countries such as India. Lean practices improve the financial performance of the firms through superior cost-reduction measures and operational efficiencies. This paper examines the impact of inventory leanness in Indian manufacturing firms on their financial performance.
Design/methodology/approach
The authors measure inventory leanness based on stochastic frontier analysis (SLA), apart from using conventional measures available in the literature. The authors analyze the impact of inventory leanness on the financial performance of firms by examining data for 12,334 unique Indian manufacturing firms for the period 2009–2018. The authors present a comparative analysis using different methods of inventory leanness and study the effects on firm performance.
Findings
First, the authors find that only 68 industries out of 411 industries follow lean practices, i.e. most industries do not follow lean practices. Second, the estimation results show that there exists a positive relationship between inventory leanness and firm performance. The results suggest that an inverted U-shaped relationship exists between inventory leanness and firm performance for the entire sample. In particular, 17% of the industries in the sample exhibit such a relationship, and it is sufficiently strong to show up in the average regression results for the entire sample.
Originality/value
The authors introduce a novel measure of inventory leanness named stochastic frontier leanness based on the SFA method used in production economics. It measures leanness by benchmarking the inventory levels against the industry “frontier”. Furthermore, the authors conduct an empirical study of the lean-financial performance relationship with a large panel dataset of Indian firms instead of the survey-based methods that were previously used in the literature.
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Hong Mao and Krzysztof Ostaszewski
The authors consider the mutual benefits of the ceding company and reinsurance company in the design of reinsurance contracts. Two objective functions to maximize social expected…
Abstract
Purpose
The authors consider the mutual benefits of the ceding company and reinsurance company in the design of reinsurance contracts. Two objective functions to maximize social expected utilities are established, which are to maximize the sum of the expected utilities of both the ceding company and reinsurance company, and to maximize their products. The first objective function, additive, emphasizes the total gains of both parties, while the second, multiplicative, accounts for the degree of substitution of gains of one party through the loss of the other party. The optimal price and retention of reinsurance are found by a grid search method, and numerical analysis is conducted. The results indicate that the optimal solutions for two objective functions are quite different. However, optimal solutions are sensitive to the change of the means and volatilities of the claim loss for both objective functions. The results are potentially valuable to insurance regulators and government entities acting as reinsurers of last resort.
Design/methodology/approach
In this paper, the authors apply relatively simple, but in the view significant, methods and models to discuss the optimization of excess loss reinsurance strategy. The authors only consider the influence of loss distribution on optimal retention and reinsurance price but neglect the investment factor. The authors also consider the benefits of both ceding company and reinsurance company to determine optimal premium and retention of reinsurance jointly based on maximizing social utility: the sum (or the product) of expected utilities of reinsurance company and ceding company. The authors solve for optimal solutions numerically, applying simulation.
Findings
This paper establishes two optimization models of excess-of-loss reinsurance contract against catastrophic losses to determine optimal premium and retention. One model considers the sum of the expected utilities of a ceding company and a reinsurance company's expected utility; another considers the product of them. With an example, the authors find the optimal solutions of premium and retention of excess loss reinsurance. Finally, the authors carry out the sensitivity analysis. The results show that increasing the means and the volatilities of claim loss will increase the optimal retention and premium. For objective function I, increasing the coefficients of risk aversion of or reducing the coefficients of risk aversion of will make the optimal retention reduced but the optimal premium increased, and vice versa. However, for objective function 2, the change of coefficient of risk aversion has no effect on optimal solutions.
Research limitations/implications
Utility of the two partners: The ceding company and the reinsurance company, may have different weights and different significance. The authors have not studied their relative significance. The simulation approach in numerical methods limits us to the probability distributions and stochastic processes the authors use, based on, generally speaking, lognormal models of rates of return. This may need to be generalized to other returns, including possible models of shocks through jump processes.
Practical implications
In the recent two decades, reinsurance companies have played a great role in hedging mega-catastrophic losses. For example, reinsurance companies (and special loss sharing arrangements) paid as much as two-thirds of the insured losses for the September 11, 2001 tragedy. Furthermore, large catastrophic events have increased the role of governments and regulators as reinsurers of last resort. The authors hope that the authors provide guidance for possible balancing of the needs of two counterparties to reinsurance contracts.
Social implications
Nearly all governments around the world are engaged in regulation of insurance and reinsurance, and some are reinsurers themselves. The authors provide guidance for them in these activities.
Originality/value
The authors believe this paper to be a completely new and original contribution in the area, by providing models for balancing the utility to the ceding insurance company and the reinsurance company.
研究目的
我們探討分出公司和再保險公司在再保險合約的設計上、如何能達至互利互惠。研究確立了兩個目標函數,分別為把分出公司和再保險公司兩者之預期效用的總和最大化,以及把它們的產品最佳化。第一個目標函數是加法的,強調兩個參與方的總增益;而第二個目標函數則是乘法的,這個目標函數,闡釋參與方因另一方虧損而有所收益之取代度。再保險的最佳價格和自留額是利用網格搜索法找出的,數值分析也予以進行。研究結果顯示,兩個目標函數的最佳解決方案甚為不同。唯最佳解決方案會對就這兩個目標函數而言的追討損失的波動、以及其平均值之改變產生敏感反應。研究結果將會見其價值於作為在萬不得已的時候的再保險人的保險業規管機構和政府實體。
研究設計/方法/理念
在這學術論文裡,我們採用了相對簡單、但我們認為是重要的方法和模型,來探討超額賠款再保險策略的優化課題。我們只考慮虧損分佈對最佳自留額和再保險價格的影響,而不去檢視投資因素。我們亦考慮對分出公司和再保險公司兩者的利益,來釐定最佳保費和再保險的自留額,而這兩者則共同建基於把社會效益最大化之上:再保險公司和分出公司的預期效益的總和 (或其積數) 。 我們採用類比模仿方法、來解決尋求在數字上最佳解決方案的問題。
研究結果
本研究建立了就應對嚴重虧損而設的兩個超額賠款再保險合約的優化模型,來釐定最佳的保費和自留額。其中一個模型考慮了分出公司和再保險公司兩者各自的預期效益的總和。另外的一個模型則考慮了兩者的預期效益的積數。透過例子,我們找到了保費和超額虧損再保險自留額的最佳解決方案。最後,我們進行了敏感度分析。研究結果顯示、若增加追討損失的平均值和波動,則最佳自留額和保費也會隨之而增加。就第一個目標函數而言,若增加風險規避係數、或減少這個係數,則最佳自留額會隨之而減少,但最佳保費卻會隨之而增加,反之亦然。唯就第二個目標函數而言,風險規避係數的改變,對最佳解決方案是沒有影響的。
研究的局限/啟示
– 有關的兩個夥伴之效用性:分出公司和再保險公司或有不同的份量和重要性。我們沒有探討兩者的相對重要性。
– 我們以數值方法為核心的類比模仿研究法、使我們局限於機率分配和一般而言建基於投資報酬率對數常態模型之隨機過程的使用。我們或許需要調節研究法。以能概括其它回報收益,包括透過跳躍過程而可能達至之沖擊模型。
– 有關的兩個夥伴之效用性:分出公司和再保險公司或有不同的份量和重要性。我們沒有探討兩者的相對重要性。
– 我們以數值方法為核心的類比模仿研究法、使我們局限於機率分配和一般而言建基於投資報酬率對數常態模型之隨機過程的使用。我們或許需要調節研究法。以能概括其它回報收益,包括透過跳躍過程而可能達至之沖擊模型。
實務方面的啟示
在過去20年裡,再保險公司在控制極嚴重災難性的損失上曾扮演重要的角色。例如、再保險公司 (以及特殊的損失分擔安排) 為了2001年9月11日的災難事件而支付多至保險損失的三分之二的費用。而且,重大的災難性事件使政府及作為最後出路再保險人的調控者得扮演更重要的角色。我們希望研究結果能為再保險合約兩對手提供指導,以平衡雙方的需要。
社會方面的啟示
全球差不多每個政府都參與保險和再保險的管理工作,有部份更加本身就是再保險人。研究結果為他們的管理工作提供了指導。
研究的原創性/價值
我們相信本學術論文、提供了平衡分出保險公司和再保險公司效用性的模型,就此而言,本論文在相關的領域上作出了全新和獨創性的貢獻。
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Amir T. Payandeh Najafabadi and Fatemeh Atatalab
The usual, simple and computationally expensive recovery payment method for a given reinsurance treaty, besides the total run-off triangle, builds a new run-off triangle, say…
Abstract
Purpose
The usual, simple and computationally expensive recovery payment method for a given reinsurance treaty, besides the total run-off triangle, builds a new run-off triangle, say recovery run-off triangle, for the reinsurer’s contribution and predicts the reinsurer’s contribution to the total loss reserves. This paper, without building a recovery run-off triangle, uses the available prior knowledge about a reinsurance treaty to predict the cedent’s loss reserve under five reinsurance treaties.
Design/methodology/approach
The authors propose a new solution to the problem of how to consider reserving issues when there is a reinsurance treaty for a portfolio of general insurance policies. Considering this when determining pricing or making capital decisions is very important.
Findings
In particular, it considers the quota share (QS) treaty, surplus (SPL) treaty, excess-of-loss (XL) treaty, largest claims reinsurance (LCR) treaty and excédent du coût moyen relatif (ECOMOR) treaty. Then, it develops a theoretical foundation for predicting the cedent’s loss reserve and evaluating such prediction using the mean square error of prediction (MSEP). The impact of such reinsurance treaties on the variability of the cedent’s loss reserve has been investigated through a simulation study.
Originality/value
This paper, without building a recovery run-off triangle, uses the available prior knowledge about a reinsurance treaty to predict the cedent’s loss reserve under five reinsurance treaties. In particular, it considers the QS treaty, SPL treaty, XL treaty, LCR treaty and ECOMOR treaty. Then, it develops a theoretical foundation for predicting the cedent’s loss reserve and evaluating such prediction using the MSEP. The impact of such reinsurance treaties on the variability of the cedent’s loss reserve has been investigated through a simulation study.
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Elyas Abdulahi Mohamued, Muhammad Asif Khan, Natanya Meyer, József Popp and Judit Oláh
This study aims to analyse the efficiency effects of institutional distance on Chinese outward foreign direct investment (FDI) in Africa.
Abstract
Purpose
This study aims to analyse the efficiency effects of institutional distance on Chinese outward foreign direct investment (FDI) in Africa.
Design/methodology/approach
The study utilised the true fixed-effect stochastic frontier analysis (SFA) model. Data from 2003 to 2016 (14 years) were acquired from 42 targeted African countries, which are included in the analysis.
Findings
The results reveal that FDI flow efficiency can be maximised with a high institutional distance between China and African countries. Contrariwise, comparable institutional distance, measured by the rule of law, regulatory quality and government effectiveness between the host and home countries, reflected a significant positive impact for Chinese outward foreign direct investment (OFDIs), indicating Chinese MNEs can invest directly in a country with comparable institutional characteristics.
Originality/value
There have been limited exceptional studies that assessed the effect of institutional distance between emerging countries. However, none of these studies investigated the effect of institutional distance between China and Africa at a national level. Using the advantage of the SFA model, this study assesses the efficiency effects of institutional distance between the host and home country.
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