Demand Uncertainty (demand + uncertainty)

Distribution by Scientific Domains
Distribution within Business, Economics, Finance and Accounting


Selected Abstracts


DEMAND UNCERTAINTY AND RESALE PRICE MAINTENANCE

CONTEMPORARY ECONOMIC POLICY, Issue 4 2000
D FLATH
When retailers must commit to shipment quantities prior to resolution of demand uncertainty, manufacturer stipulation of a minimum retail price is likely to be profitable for the manufacturer and not damaging to the retailers. The reason is simple: if demand turns out to be low, the unfettered market-clearing price can lie below the price that maximizes total sales revenue. A minimum retail price that is binding in the low-demand state can thus increase total revenue even though it saddles retailers with unsold merchandise. The ubiquity of full reimbursement for returns in Japan, even though it is in theory merely a second-best way of achieving minimum retail price stipulations, reveals important aspects of manufacturer maintenance of retail prices having to do with enforcement problems, the allocation of risk-bearing, and economic incentives. These aspects of resale price maintenance (RPM) are relevant to the normative evaluation of the special exemptions for RPM that Japan's Fair Trade Commission has long maintained but is now phasing out. [source]


THE CHOICE OF CAPACITY IN MIXED DUOPOLY UNDER DEMAND UNCERTAINTY,

THE MANCHESTER SCHOOL, Issue 3 2006
YUANZHU LU
We analyze the capacity choice of firms under demand uncertainty in a mixed duopoly market consisting of one private firm and one public firm. We define a two-stage game where firms choose capacity in the first stage without knowing which state of Nature is going to be realized, and output in the second stage knowing which state is realized. We address the question of maintaining over and under capacity in the equilibrium as a strategic device; and show that both symmetric and asymmetric outcomes can be realized. [source]


Robust Transportation Network Design Under Demand Uncertainty

COMPUTER-AIDED CIVIL AND INFRASTRUCTURE ENGINEERING, Issue 1 2007
Satish V. Ukkusuri
The origin,destination trip matrices are taken as random variables with known probability distributions. Instead of finding optimal network design solutions for a given future scenario, we are concerned with solutions that are in some sense "good" for a variety of demand realizations. We introduce a definition of robustness accounting for the planner's required degree of robustness. We propose a formulation of the robust network design problem (RNDP) and develop a methodology based on genetic algorithm (GA) to solve the RNDP. The proposed model generates globally near-optimal network design solutions, f, based on the planner's input for robustness. The study makes two important contributions to the network design literature. First, robust network design solutions are significantly different from the deterministic NDPs and not accounting for them could potentially underestimate the network-wide impacts. Second, systematic evaluation of the performance of the model and solution algorithm is conducted on different test networks and budget levels to explore the efficacy of this approach. The results highlight the importance of accounting for robustness in transportation planning and the proposed approach is capable of producing high-quality solutions. [source]


Monopoly Price Dispersion Under Demand Uncertainty

INTERNATIONAL ECONOMIC REVIEW, Issue 3 2001
James D. Jr. DanaArticle first published online: 23 DEC 200
When a monopolist sets its price before its demand is known, then it may set more than one price and limit the availability of its output at lower prices. This article adds demand uncertainty and price rigidities to the standard model of monopoly pricing. When there are two states of demand and the ex post monopoly price is greater when demand is high then the monopolist's optimal ex ante pricing strategy is to set two prices and limit purchases at the lower price. [source]


Environmental Uncertainty and Strategic Supply Management: A Resource Dependence Perspective and Performance Implications

JOURNAL OF SUPPLY CHAIN MANAGEMENT, Issue 3 2007
Antony Paulraj
SUMMARY Environmental uncertainty plays a crucial role in the implementation of strategic supply management initiatives. The current study adopts the resource dependence theory to explain the direct effect of supply chain uncertainties on strategic supply management, operationalized as a second-order construct comprising strategic purchasing, long-term relationship orientation, interfirm communication, cross-organizational teams and supplier integration. Using structural equation modeling, the 200-firm sample provided evidence that strategic supply management is driven by supply and technology uncertainty. Demand uncertainty, on the other hand, was not found to have a significant impact on strategic supply management. Findings further support the link between strategic supply management and the performance of both buying and supplying firms. [source]


Inter-Firm Linkages and Profitability in the Automobile Industry: The Implications for Supply Chain Management

JOURNAL OF SUPPLY CHAIN MANAGEMENT, Issue 1 2001
Harri Ramcharran
SUMMARY The current studies on supply chain management are limited in their analysis of the linkages between firms in related industries. This study estimates the degree of linkages between automotive parts suppliers and automobile manufacturers. Significant linkages are demonstrated by the high correlation coefficients of the P/E ratio of auto parts suppliers and auto manufacturers and by the results of regression analysis. Demand uncertainty in the automobile manufacturing industry, resulting from business cycles and unexpected labor disputes, is one of the major risks facing auto parts suppliers. Risk assessment, utilizing information on linkages, is important for demand management and developing profit-maximizing strategies. [source]


Disruption-management strategies for short life-cycle products

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 4 2009
Brian Tomlin
Abstract Supplier diversification, contingent sourcing, and demand switching (whereby a firm shifts customers to a different product if their preferred product is unavailable), are key building blocks of a disruption-management strategy for firms that sell multiple products over a single season. In this article, we evaluate 12 possible disruption-management strategies (combinations of the basic building-block tactics) in the context of a two-product newsvendor. We investigate the influence of nine attributes of the firm, its supplier(s), and its products on the firs preference for the various strategies. These attributes include supplier reliability, supplier failure correlation, payment responsibility in the event of a supply failure, product contribution margin, product substitutability, demand uncertainties and correlation, and the decision makes risk aversion. Our results show that contingent sourcing is preferred to supplier diversification as the supply risk (failure probability) increases, but diversification is preferred to contingent sourcing as the demand risk (demand uncertainty) increases. We find that demand switching is not effective at managing supply risk if the products are sourced from the same set of suppliers. Demand switching is effective at managing demand risk and so can be preferred to the other tactics if supply risk is low. Risk aversion makes contingent sourcing preferable over a wider set of supply and demand-risk combinations. We also find a two-tactic strategy provides almost the same benefit as a three-tactic strategy for most reasonable supply and demand-risk combinations. © 2009 Wiley Periodicals, Inc. Naval Research Logistics, 2009 [source]


DEMAND UNCERTAINTY AND RESALE PRICE MAINTENANCE

CONTEMPORARY ECONOMIC POLICY, Issue 4 2000
D FLATH
When retailers must commit to shipment quantities prior to resolution of demand uncertainty, manufacturer stipulation of a minimum retail price is likely to be profitable for the manufacturer and not damaging to the retailers. The reason is simple: if demand turns out to be low, the unfettered market-clearing price can lie below the price that maximizes total sales revenue. A minimum retail price that is binding in the low-demand state can thus increase total revenue even though it saddles retailers with unsold merchandise. The ubiquity of full reimbursement for returns in Japan, even though it is in theory merely a second-best way of achieving minimum retail price stipulations, reveals important aspects of manufacturer maintenance of retail prices having to do with enforcement problems, the allocation of risk-bearing, and economic incentives. These aspects of resale price maintenance (RPM) are relevant to the normative evaluation of the special exemptions for RPM that Japan's Fair Trade Commission has long maintained but is now phasing out. [source]


Managing Uncertainty in Creative Industries: Lessons from Jerry Springer the Opera

CREATIVITY AND INNOVATION MANAGEMENT, Issue 3 2006
Anna M. Dempster
This article considers the impact of uncertainty on entrepreneurial performance in the UK theatre industry. The article identifies and evaluates the major determinants of demand uncertainty ,audience composition, critical acclaim and media coverage, whose management is key to entrepreneurial success. An in-depth historical case study of the controversial production, Jerry Springer the Opera, analyses the evolution of these three distinct sources of uncertainty and illustrates that they should not be treated in isolation since they interact in complex ways which change with time. The case study shows how the entrepreneurs involved used a multi-staged production process as a strategy to market test their product and to distribute their risks across agents and over time. The article therefore considers what contributed to both the successes and failures of these entrepreneurs as well as highlighting important strategic lessons for managing uncertainty in creative industries. [source]


Retailer's Response to Alternate Manufacturer's Incentives Under a Single-Period, Price-Dependent, Stochastic-Demand Framework,

DECISION SCIENCES, Issue 4 2005
F. J. Arcelus
ABSTRACT This article considers the joint development of the optimal pricing and ordering policies of a profit-maximizing retailer, faced with (i) a manufacturer trade incentive in the form of a price discount for itself or a rebate directly to the end customer; (ii) a stochastic consumer demand dependent upon the magnitude of the selling price and of the trade incentive, that is contrasted with a riskless demand, which is the expected value of the stochastic demand; and (iii) a single-period newsvendor-type framework. Additional analysis includes the development of equal profit policies in either form of trade incentive, an assessment of the conditions under which a one-dollar discount is more profitable than a one-dollar rebate, and an evaluation of the impact upon the retailer-expected profits of changes in either incentive or in the degree of demand uncertainty. A numerical example highlights the main features of the model. The analytical and numerical results clearly show that, as compared to the results for the riskless demand, dealing with uncertainty through a stochastic demand leads to (i) (lower) higher retail prices if additive (multiplicative) error, (ii) lower (higher) pass throughs if additive (multiplicative) error, (iii) higher claw backs in both error structures wherever applicable, and (iv) higher rebates to achieve equivalent profits in both error structures. [source]


Channel Strategies and Stocking Policies in Uncapacitated and Capacitated Supply Chains,

DECISION SCIENCES, Issue 2 2002
Jayashree Mahajan
ABSTRACT A supply chain consisting of a single supplier distributing two independent products through multiple retailers is analyzed in this paper. The supplier needs to incentivize its retailers to adopt stocking policies that are mutually advantageous and that result in the optimal level of market coverage. The focus is on determining the optimal stocking policies for retailers and the resulting distribution strategy given that the supplier has either unlimited or limited capacity. The results provide insights on the optimal distribution strategy and stocking policies for the supply chain. In general, the paper shows that it is optimal for the supplier to use an intensive distribution strategy (i.e., the products are stocked by all retailers). Selective or exclusive strategies are optimal only when retailers are risk averse, stocking synergies exist, and there are differences in demand or supply uncertainties across products. The analysis also shows that retailers hold larger stocks of a product which generates higher supplier margins but only when the supplier has unlimited capacity. If the supplier has limited capacity, then their margins have no effect on retailers' stocking decisions. Contrary to conventional wisdom, retailers hold larger stocks of a product that has less demand uncertainty as compared to one that has more demand uncertainty. [source]


The Impact of Forecast Errors on Early Order Commitment in a Supply Chain,

DECISION SCIENCES, Issue 2 2002
Xiande Zhao
ABSTRACT Supply chain partnership involves mutual commitments among participating firms. One example is early order commitment, wherein a retailer commits to purchase a fixed-order quantity and delivery time from a supplier before the real need takes place. This paper explores the value of practicing early order commitment in the supply chain. We investigate the complex interactions between early order commitment and forecast errors by simulating a supply chain with one capacitated supplier and multiple retailers under demand uncertainty. We found that practicing early order commitment can generate significant savings in the supply chain, but the benefits are only valid within a range of order commitment periods. Different components of forecast errors have different cost implications to the supplier and the retailers. The presence of trend in the demand increases the total supply chain cost, but makes early order commitment more appealing. The more retailers sharing the same supplier, the more valuable for the supply chain to practice early order commitment. Except in cases where little capacity cushion is available, our findings are relatively consistent in the environments where cost structure, number of retailers, capacity utilization, and capacity policy are varied. [source]


The Signalling Role of Municipal Currencies in Local Development

ECONOMICA, Issue 288 2005
Rajshri Jayaraman
The last decade has seen the burgeoning of several hundred local community currency institutions in cities across the world. Although residents of these communities claim that local currency promotes local development, how it does so has hitherto been unexplored. We argue that the introduction of a municipal currency may serve as a signal of demand for local goods. Where demand uncertainty deters firms from investing in more productive technologies, such a signal improves the chances that technology choice will be optimal. The introduction of a local currency therefore always improves ex ante efficiency and may lead to ex post efficiency, with strictly higher levels of productivity and welfare. [source]


Outsourcing HR: The Impact of Organizational Characteristics

HUMAN RESOURCE MANAGEMENT, Issue 2 2001
Brian S. Klaas
This study investigates the relationship between a number of organizational characteristics and the decision to outsource HR. Determinants of the outsourcing of four categories of HR are examined: HR generalists activities (e.g., performance appraisal), transactional activities (e.g., payroll), human capital activities (e.g., training), and recruiting and selection. HR executives in 432 organizations provided data on outsourcing levels and organizational characteristics. Reliance on HR outsourcing was associated with idiosyncratic HR practices, strategic HR involvement, positive HR outcomes, promotional opportunities, demand uncertainty, and pay level. As predicted, however, the impact of organizational characteristics varied among the different types of HR activities outsourced. © 2001 John Wiley & Sons, Inc. [source]


Monopoly Price Dispersion Under Demand Uncertainty

INTERNATIONAL ECONOMIC REVIEW, Issue 3 2001
James D. Jr. DanaArticle first published online: 23 DEC 200
When a monopolist sets its price before its demand is known, then it may set more than one price and limit the availability of its output at lower prices. This article adds demand uncertainty and price rigidities to the standard model of monopoly pricing. When there are two states of demand and the ex post monopoly price is greater when demand is high then the monopolist's optimal ex ante pricing strategy is to set two prices and limit purchases at the lower price. [source]


Mergers with Product Market Risk

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 3 2006
Albert Banal-Estañol
This paper studies the causes and the consequences of horizontal mergers among risk-averse firms. The amount of diversification depends on the allocation of shares among the merging firms, with a direct risk-sharing effect and an indirect strategic effect. If firms compete in quantities, consolidation makes firms more aggressive. Mergers involving few firms are then profitable with a relatively low level of risk aversion. With strong enough risk aversion, mergers reduce prices and improve social welfare. If firms instead compete in prices, consumers do not benefit from mergers in markets with demand uncertainty, but can easily benefit with cost uncertainty. [source]


Asymmetric Information, Bargaining, and International Mergers

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 4 2001
Satya P. Das
The formation of international mergers is examined in the presence of two kinds of asymmetric information, one when a local firm has private information on market size and the other when a foreign firm has private information on its technology. In each situation, parametric configurations are identified under which a merger offer may or may not be made. It also examines the kind of offer and the probability of its acceptance. The likelihood of a merger beingformed is also related to the basic market size, demand uncertainty, and cost uncertainty. Welfare effects of tax/subsidy policies by the host country are also analyzed. [source]


Managing risk through a flexible recipe framework

AICHE JOURNAL, Issue 3 2008
Sergio Ferrer-Nadal
Abstract A novel approach is proposed that exploits the use of a flexible recipe framework as a better way to handle the risk associated with the scheduling under uncertainty of batch chemical plants. The proposed solution strategy relies on a novel two-stage stochastic formulation that explicitly includes the trade-off between risk and profit at the decision-making level. The model uses a continuous-time domain representation and the generalized notion of precedence. Management of risk is explicitly addressed by including a control measure (i.e., the profit in the worst scenario), as an additional objective to be considered, thus, leading to a multiobjective optimization problem. To overcome the numerical difficulties associated with such mathematical formulation, a decomposition strategy based on the sample average approximation (SAA) is introduced. The main advantages of this approach are illustrated through a case study, in which a set of solutions appealing to decision makers with different attitudes toward risk are obtained. The potential benefits of the proposed flexible recipe framework as a way of managing the risk associated with the plant operation under demand uncertainty are highlighted through comparison with the conventional approach that considers nominal operating conditions. Numerical results corroborate the advantages of exploiting the capabilities of the proposed flexible recipe framework for risk management purposes. © 2008 American Institute of Chemical Engineers AIChE J, 2008 [source]


Addressing the scheduling of chemical supply chains under demand uncertainty

AICHE JOURNAL, Issue 11 2006
Gonzalo Guillén
Abstract A multistage stochastic optimization model is presented to address the scheduling of supply chains with embedded multipurpose batch chemical plants under demand uncertainty. In order to overcome the numerical difficulties associated with the resulting large-scale stochastic mixed-integer-linear-programming (MILP) problem, an approximation strategy comprising two steps, and based on the resolution of a set of deterministic and two-stage stochastic models is presented. The performance of the proposed strategy regarding computation time and optimality gap is studied through comparison with other traditional approaches that address optimization under uncertainty. Results indicate that the proposed strategy provides better solutions than stand-alone two-stage stochastic programming and two-stage shrinking-horizon algorithms for similar computational efforts and incurs much lower computation times than the rigorous multistage stochastic model. © 2006 American Institute of Chemical Engineers AIChE J, 2006 [source]


Employment Adjustment at the Firm Level.

LABOUR, Issue 1 2002
A Theoretical Model, an Empirical Investigation for West German Manufacturing Firms
In this paper, employment adjustment at the firm level is estimated with a large panel of business survey data from West German manufacturing. The specification is based on a framework of monopolistic competition in the product market. Special emphasis is devoted to the analysis of the impact of demand uncertainty, capacity constraints, technological change and competition. The empirical results reveal that demand uncertainty and capacity constraints significantly affect employment adjustment. Innovative firms are more successful; they increase employment and exhibit a higher utilization of capacities. Employment adjustment also depends on competition. In monopolistic markets, the volatility of employment is higher. [source]


Strategic dynamic sourcing from competing suppliers with transferable capacity investment

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 6 2009
Cuihong Li
Abstract We study the supplier relationship choice for a buyer that invests in transferable capacity operated by a supplier. With a long-term relationship, the buyer commits to source from a supplier over a long period of time. With a short-term relationship, the buyer leaves open the option of switching to a new supplier in the future. The buyer has incomplete information about a supplies efficiency, and thus uses auctions to select suppliers and determine the contracts. In addition, the buyer faces uncertain demand for the product. A long-term relationship may be beneficial for the buyer because it motivates more aggressive bidding at the beginning, resulting a lower initial price. A short-term relationship may be advantageous because it allows switching, with capacity transfer at some cost, to a more efficient supplier in the future. We find that there exists a critical level of the switching cost above which a long-term relationship is better for the buyer than a short-term relationship. In addition, this critical switching cost decreases with demand uncertainty, implying a long-term relationship is more favorable for a buyer facing volatile demand. Finally, we find that in a long-term relationship, capacity can be either higher or lower than in a short-term relationship. © 2009 Wiley Periodicals, Inc. Naval Research Logistics 2009 [source]


Disruption-management strategies for short life-cycle products

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 4 2009
Brian Tomlin
Abstract Supplier diversification, contingent sourcing, and demand switching (whereby a firm shifts customers to a different product if their preferred product is unavailable), are key building blocks of a disruption-management strategy for firms that sell multiple products over a single season. In this article, we evaluate 12 possible disruption-management strategies (combinations of the basic building-block tactics) in the context of a two-product newsvendor. We investigate the influence of nine attributes of the firm, its supplier(s), and its products on the firs preference for the various strategies. These attributes include supplier reliability, supplier failure correlation, payment responsibility in the event of a supply failure, product contribution margin, product substitutability, demand uncertainties and correlation, and the decision makes risk aversion. Our results show that contingent sourcing is preferred to supplier diversification as the supply risk (failure probability) increases, but diversification is preferred to contingent sourcing as the demand risk (demand uncertainty) increases. We find that demand switching is not effective at managing supply risk if the products are sourced from the same set of suppliers. Demand switching is effective at managing demand risk and so can be preferred to the other tactics if supply risk is low. Risk aversion makes contingent sourcing preferable over a wider set of supply and demand-risk combinations. We also find a two-tactic strategy provides almost the same benefit as a three-tactic strategy for most reasonable supply and demand-risk combinations. © 2009 Wiley Periodicals, Inc. Naval Research Logistics, 2009 [source]


Bayesian strategies for dynamic pricing in e-commerce

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 3 2007
Eric Cope
Abstract E-commerce platforms afford retailers unprecedented visibility into customer purchase behavior and provide an environment in which prices can be updated quickly and cheaply in response to changing market conditions. This study investigates dynamic pricing strategies for maximizing revenue in an Internet retail channel by actively learning customers' demand response to price. A general methodology is proposed for dynamically pricing information goods, as well as other nonperishable products for which inventory levels are not an essential consideration in pricing. A Bayesian model of demand uncertainty involving the Dirichlet distribution or a mixture of such distributions as a prior captures a wide range of beliefs about customer demand. We provide both analytic formulas and efficient approximation methods for updating these prior distributions after sales data have been observed. We then investigate several strategies for sequential pricing based on index functions that consider both the potential revenue and the information value of selecting prices. These strategies require a manageable amount of computation, are robust to many types of prior misspecification, and yield high revenues compared to static pricing and passive learning approaches. © 2006 Wiley Periodicals, Inc. Naval Research Logistics, 2007 [source]


Robust tower location for code division multiple access networks

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 2 2007
Jay M. Rosenberger
Abstract Designing Code Division Multiple Access networks includes determining optimal locations of radio towers and assigning customer markets to the towers. In this paper, we describe a deterministic model for tower location and a stochastic model to optimize revenue given a set of constructed towers. We integrate these models in a stochastic integer programming problem with simple recourse that optimizes the location of towers under demand uncertainty. We develop algorithms using Benders' reformulation, and we provide computational results. © 2006 Wiley Periodicals, Inc. Naval Research Logistics, 2007 [source]


Market risk and process uncertainty in production operations

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 7 2006
Bardia Kamrad
Abstract By adopting a real options framework we develop a production control model that jointly incorporates process and market uncertainties. In this model, process uncertainty is defined by random fluctuations in the outputs' yield and market risk through demand uncertainty for the output. In our approach, production outputs represent commodities or items for which financial contracts do not trade. Outputs are also functionally linked to the level of input inventories. To extend the model's applicability to a wide range of production industries, inputs are modeled to reflect either renewable or partially renewable or non-renewable resources. Given this setting, techniques of stochastic control theory are employed to obtain value maximizing production policies in a constrained capacity environment. The rate of production is modeled as an adapted positive real-valued process and analogously evaluated as a sequence of complex real options. Since optimal adjustments to the rate of production also functionally depend on the outputs' yield, we optimally establish "trigger boundaries" justifying controlled variations to the rate of production over time. In this context, we provide closed form analytic results and demonstrate their robustness with respect to the stochastic (including mean reverting) processes considered. Using these results, we also demonstrate that the value (net of holding costs) accrued to the producer from having an inventory of the output is equivalent to the producer's reservation price to operationally curb its process yield. These generalizations extend the scope of model applicability and provide a basis for applying the real options methodology in the operations arena. The model is explored numerically using a stylized example that allows for both output and demand uncertainty and achieves greater realism by incorporating an element of smoothing into the sequence of production decisions. © 2006 Wiley Periodicals, Inc. Naval Research Logistics, 2006 [source]


A general strategic capacity planning model under demand uncertainty

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 2 2006
Woonghee Tim Huh
Abstract Capacity planning decisions affect a significant portion of future revenue. In equipment intensive industries, these decisions usually need to be made in the presence of both highly volatile demand and long capacity installation lead times. For a multiple product case, we present a continuous-time capacity planning model that addresses problems of realistic size and complexity found in current practice. Each product requires specific operations that can be performed by one or more tool groups. We consider a number of capacity allocation policies. We allow tool retirements in addition to purchases because the stochastic demand forecast for each product can be decreasing. We present a cluster-based heuristic algorithm that can incorporate both variance reduction techniques from the simulation literature and the principles of a generalized maximum flow algorithm from the network optimization literature. © 2005 Wiley Periodicals, Inc. Naval Research Logistics, 2006 [source]


Markets for surplus components with a strategic supplier,

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 8 2005
Lingxiu Dong
Abstract We study markets for surplus components, which allow manufacturers with excess component inventory to sell to firms with a shortage. Recent developments in internet commerce have the potential to greatly increase the efficiency of such markets. We develop a one-period model in which a monopolist supplier sells to a number of independent manufacturers who are uncertain about demand for final goods. After uncertainty is resolved, the manufacturers have the opportunity to trade. Because uncertainty is over demand functions, the model allows us to endogenize both the price of final goods and the price of components in wholesale and surplus markets. We derive conditions on demand uncertainty that determine whether a surplus market will increase or decrease supplier profits. Increased costs of transacting on the surplus market may benefit manufacturers, because of the impact of these costs on the supplier's pricing power. The surplus market can decrease overall efficiency of the supply chain, since the benefit of better allocation of components may be outweighed by an increased double-marginalization effect. © 2005 Wiley Periodicals, Inc. Naval Research Logistics, 2005. [source]


Inventory cost impact of order processing priorities based on demand uncertainty

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 4 2002
Ananth.
Abstract We evaluate an approach to decrease inventory costs at retail inventory locations that share a production facility. The retail locations sell the same product but differ in the variance of retail demand. Inventory policies at retail locations generate replenishment orders for the production facility. The production facility carries no finished goods inventory. Thus, production lead time for an order is the sojourn time in a single server queueing system. This lead time affects inventory costs at retail locations. We examine the impact of moving from a First Come First Served (FCFS) production rule for orders arriving at the production facility to a rule in which we provide non-preemptive priority (PR) to orders from retail locations with higher demand uncertainty. We provide three approximations for the ratio of inventory costs under PR and FCFS and use them to identify conditions under which PR decreases retail inventory costs over FCFS. We then use a Direct Approach to establish conditions when PR decreases retail inventory costs over FCFS. We extend the results to orders from locations that differ in the mean and variance of demand uncertainty. The analysis suggests that tailoring lead times to product demand characteristics may decrease system inventory costs. © 2002 Wiley Periodicals, Inc. Naval Research Logistics 49: 376,390, 2002; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/nav.10016 [source]


Listing Price, Time on Market, and Ultimate Selling Price: Causes and Effects of Listing Price Changes

REAL ESTATE ECONOMICS, Issue 2 2002
John R. Knight
Information about price changes during a home's marketing period is typically missing from data used to investigate the listing price, selling price, and selling time relationship. This paper incorporates price revision information into the study of this relationship. Using a maximum-likelihood probit model, we examine the determinants of list price changes and find evidence consistent with the theory of pricing behavior under demand uncertainty. Homes most likely to undergo list price changes are those with high initial markups and vacant homes, while homes with unusual features are the least likely to experience a price revision. We also explore the impact of missing price change information on estimating a representative model of house price and market time. Our results suggest that mispricing the home in the initial listing is costly to the seller in both time and money. Homes with large percentage changes in list price take longer to sell and ultimately sell at lower prices. [source]


Uncertainty and Investment: Some Evidence from the Panel Data of Japanese Manufacturing Firms

THE JAPANESE ECONOMIC REVIEW, Issue 2 2000
Kazuo Ogawa
We analyse empirically the effect of uncertainty on fixed investment based on a panel data set of Japanese manufacturing firms. The uncertainty measure, represented by the conditional standard deviation of the sales growth rate, is constructed by employing three different statistical models. We also decompose the demand uncertainty into aggregate, industry-wide, and firm-specific forms of uncertainty. We find that uncertainty, in particular aggregate and industry-wide uncertainty, exerts a significantly negative effect on investment irrespective of the statistical methods chosen. We also find that this negative relationship between investment and uncertainty is closely related to the degree of irreversibility of capital. JEL Classification Number: D92. [source]