This paper develops a model of an integrated vendor–buyer supply chain with imperfect production and shortages. We assume that market demand is sensitive to the buyer’s selling price and thus study combined operations and pricing decisions in the supply chain. We first derive the expected profit per unit of time using the well-known renewal-reward theorem, and then maximize profit for the cases...

This paper investigates the impacts of both the demand uncertainty and the supply disruption probability on the decisions of two sourcing strategies: one is dual sourcing and the other is single sourcing with contingent supply. The expected profit functions and the optimal decisions of the buyer are derived and compared. Then sensitivity analysis is given through numerical examples. Explicit in...

We consider the problem of computing multiple headways for a single bus line to maximize the expected daily profit. The stochastic bus-line model assumes that (1) the passenger arrivals follow a Poisson process with possible reneging; (2) the number of alighting passengers at each stop follows a binomial distribution; and (3) the bus travel time follows a Weibull distribution. The objective fun...

The present paper studies repeated Bertrand oligopoly with multiple markets. The markets are subject to independent, stochastic fluctuations in demands. According to the literature, the demand fluctuations generally hinder collusion, while the multimarket contact sometimes facilitates it. We show that when only partial collusion is sustainable under a single market, the per-market expected prof...

This paper investigates repetitive purchase decisions of perishable items in the face of uncertain demand (the newsvendor problem). The experimental design includes: high, or low profit levels; and uniform, or normal demand distributions. The results show that in all cases both learning and convergence occur and are effected by: (1) the mean demand; (2) the order-size of the maximal expected pr...

We consider a problem faced by an airline that operates a number of parallel flights to transport cargo between a particular origin to destination pair. The airline can sell its cargo capacity either through allotment contracts or on the spot market, where customers exhibit choice behavior between different flights. The goal is to simultaneously select allotment contracts among available bids a...

An area supervisor managing an area chain of local urban retail stores faces the problem of determining the number of employees and allocating them to retail stores (workforce size and its allocation). We propose a model to maximize the overall expected profit rate of a coordinated area chain where employee absenteeism is uncertain. Retail stores operate as a Markovian loss queueing system. An ...

Manufacturing firms routinely commit resources to increase yield rates through productand process-improvement initiatives. Champions of such yield-improvement projects may assume that stochastically larger yield rates are beneficial. In this note, we show that this need not hold, even when the contingent production lot sizes are chosen optimally. We employ stochastic comparison techniques to sh...

The literature views aggressive trading behavior as the key for representativeness heuristic traders to survive in competition with rational traders. This paper provides another reason. That is, in this dynamic model of a competitive securities market, representativeness heuristic traders can derive more expected profit from the misvaluations (created by noise traders) than can rational traders...

We study the design of truthful auction mechanisms for maximizing the seller’s profit. We focus on the case when the auction mechanism does not have any knowledge of bidders’ valuations, especially of their upper bound. For the Single-Item auction, we obtain an “asymptotically” optimal scheme: for any k ∈ Z and ǫ > 0, we give a randomized truthful auction that guarantees an expected profit of Ω...