Business, Stephen M. Ross School of - Working Papers Series
http://hdl.handle.net/2027.42/35324
2014-12-17T11:49:31ZBargaining in Supply Chains
http://hdl.handle.net/2027.42/109717
Bargaining in Supply Chains
Leider, Stephen; Lovejoy, William S.
We study experimentally bargaining in a multiple-tier supply chain with horizontal competition and sequential bargaining between tiers. Our treatments vary the cost differences between firms in tiers 1 and 2. We measure how these underlying costs influence the efficiency, negotiated prices and profit distribution across the supply chain, and the consistency of these outcomes with existing theory. We find that the structural issue of cost differentials dominates personal characteristics in explaining outcomes, with profits in a tier generally increasing with decreased competition in the tier and increasing with decreased competition in alternate tiers. The Balanced Principal model of supply chain bargaining does a good job explaining our data, and outperforms the common assumption of leader-follower negotiations. We find a significant anchoring effect from a firm's first bid but no effect of the sequence of those bids, no evidence of failure to close via escalation of commitment, and mixed results for a deadline effect. We also find an interesting asymmetry between the buy and sells sides in employed bidding strategy. The buy side makes predominantly concessionary offers after the initial anchor, but a significant number of sell side firms engage in aggressive anti-concessionary bidding, a strategy that is effective in that it increases prices while not compromising closure rates.
2014-12-01T00:00:00ZAdaptive Parametric and Nonparametric Multi-Product Pricing Via Self-Adjusting Controls
http://hdl.handle.net/2027.42/109435
Adaptive Parametric and Nonparametric Multi-Product Pricing Via Self-Adjusting Controls
Chen, Qi (George); Jasin, Stefanus; Duenyas, Izak
We study a multi-period network revenue management (RM) problem where a seller sells multiple products made from multiple resources with finite capacity in an environment where the demand function is unknown a priori. The objective of the seller is to jointly learn the demand and price the products to minimize his expected revenue loss. Both the parametric and the nonparametric cases are considered in this paper. It is widely known in the literature that the revenue loss of any pricing policy under either case is at least k^{1/2} However, there is a considerable gap between this lower bound and the performance bound of the best known heuristic in the literature. To close the gap, we develop several self-adjusting heuristics with strong performance bound. For the general parametric case, our proposed Parametric Self-adjusting Control (PSC) attains a O(k^{1/2}) revenue loss, matching the theoretical lower bound. If the parametric demand function
family further satisfies a well-separated condition, by taking advantage of passive learning, our proposed Accelerated Parametric Self-adjusting Control achieves a much sharper revenue loss of O(log^2 k). For the nonparametric case, our proposed Nonparametric Self-adjusting Control (NSC) obtains a revenue loss of O(k^{1/2+ϵ} log k) for any arbitrarily small ϵ > 0 if the demand function is sufficiently smooth. Our results suggest that in terms of performance, the nonparametric approach can be as robust as the parametric approach, at least asymptotically. All the proposed heuristics are computationally very efficient and can be used as a baseline for developing more sophisticated heuristics for large-scale problems.
2014-12-01T00:00:00ZLinking Cross-Sectional and Aggregate Expected Returns
http://hdl.handle.net/2027.42/109420
Linking Cross-Sectional and Aggregate Expected Returns
Kozak, Serhiy
We propose a one state variable ICAPM that rationalizes the size, value, and momentum “anomalies” observed in stock returns. Our main insight is that differential covariance with news about future market discount rates drives the observed cross-sectional variation in expected returns. We find that in response to an increase in expected future market discount rates, large, growth, and recent losers company stocks outperform small, value, and recent winner stocks, respectively. Our interpretation is that such an increase in discount rates represents “bad” news for the representative investor, increasing his marginal utility of wealth. We further show that ignoring this state variable leads to drastic underestimation of the equilibrium price of “level risk” measured using bond returns. An augmented model which adds a “level” factor jointly prices both stock and bond returns.
2014-11-01T00:00:00ZReal and Nominal Equilibrium Yield Curves with Endogenous Inflation: A Quantitative Assessment
http://hdl.handle.net/2027.42/109419
Real and Nominal Equilibrium Yield Curves with Endogenous Inflation: A Quantitative Assessment
Palomino, Fransisco
The links between real and nominal bond risk premia and macroeconomic dynamics are explored analytically and quantitatively in a model with nominal rigidities and monetary policy. The interest-rate policy rule becomes a restriction linking real and nominal risk premia through endogenous inflation. The estimated model captures macroeconomic and yield curve properties of the U.S. economy, implying significantly positive real term and inflation risk bond premia. Both premia are induced by wage rigidities as a compensation for permanent productivity shocks. Stronger policy-rule responses to inflation (output) increase (decrease) both premia. Policy surprises generate significant yield volatility but negligible risk premia.
2014-10-01T00:00:00Z