Axioms for Deferred Acceptance

The deferred acceptance algorithm is often used to allocate indivisible objects when monetary transfers are not allowed. We provide two characterizations of agent‐proposing deferred acceptance allocation rules. Two new axioms—individually rational monotonicity and weak Maskin monotonicity—are essential to our analysis. An allocation rule is the agent‐proposing deferred acceptance rule for some acceptant substitutable priority if and only if it satisfies non‐wastefulness and individually rational monotonicity. An alternative characterization is in terms of non‐wastefulness, population monotonicity, and weak Maskin monotonicity. We also offer an axiomatization of the deferred acceptance rule generated by an exogenously specified priority structure. We apply our results to characterize efficient deferred acceptance rules.     

Strategy-proof and Symmetric Social Choice Functions for Public Good Economies

We study economies with one private good and one pure public good, and consider the following axioms of social choice functions. Strategy-proofness says that no agent can benefit by misrepresenting his preferences, regardless of whether the other agents misrepresent or not, and whatever his preferences are. Symmetry says that if two agents have the same preference, they must be treated equally. Anonymity says that when the preferences of two agents are switched, their consumption bundles are also switched. Individual rationality says that a social choice function never assigns an allocation which makes some agent worse off than he would be by consuming no public good and paying nothing. In Theorem 1, we characterize the class of strategy-proof, budget-balancing, and symmetric social choice functions, assuming convexity of the cost function of the public good. In Theorem 2, we characterize the class of strategy-proof, budget-balancing, and anonymous social choice functions. In Theorem 3, we characterize the class of strategy-proof, budget-balancing, symmetric, and individually rational social choice functions.     

Dynamic Supply Risk Management with Signal‐Based Forecast,Multi‐Sourcing,and Discretionary Selling

We examine the critical role of advance supply signals—such as suppliers’ financial health and production viability—in dynamic supply risk management. The firm operates an inventory system with multiple demand classes and multiple suppliers. The sales are discretionary and the suppliers are susceptible to both systematic and operational risks. We develop a hierarchical Markov model that captures the essential features of advance supply signals, and integrate it with procurement and selling decisions. We characterize the optimal procurement and selling policy, and the strategic relationship between signal‐based forecast, multi‐sourcing, and discretionary selling. We show that higher demand heterogeneity may reduce the value of discretionary selling, and that the mean value‐based forecast may outperform the stationary distribution‐based forecast. This work advances our understanding on when and how to use advance supply signals in dynamic risk management. Future supply risk erodes profitability but enhances the marginal value of current inventory. A signal of future supply shortage raises both base stock and demand rationing levels, thereby boosting the current production and tightening the current sales. Signal‐based dynamic forecast effectively guides the firm's procurement and selling decisions. Its value critically depends on supply volatility and scarcity. Ignoring advance supply signals can result in misleading recommendations and severe losses. Signal‐based dynamic supply forecast should be used when: (a) supply uncertainty is substantial, (b) supply‐demand ratio is moderate, (c) forecast precision is high, and (d) supplier heterogeneity is high.     

Managing Clearance Sales in the Presence of Strategic Customers

We study the effect of strategic customer behavior on pricing and rationing decisions of a firm selling a single product over two periods. The seller may limit the availability of the product (that is, ration) in the second (clearance) period. Some customers are strategic and respond to the firm's decisions by timing their purchases. When capacity is nonconstraining and the seller has pricing flexibility, we show that rationing in the clearance period cannot improve revenue. However, when prices are fixed in advance, rationing can improve revenue. In the latter case, we conduct a detailed analysis for linear and exponential demand curves and derive explicit expressions for optimal rationing levels. We find that the policy of doing the better of not restricting availability at the clearance price or not offering the product at the clearance price is typically near optimal. Our analysis also suggests that rationing—although sometimes offering considerable benefit over allowing unrestricted availability in the clearance period—may allow the seller to obtain only a small fraction of the optimal revenue when the prices are chosen optimally without rationing. We extend the analysis to cases where the capacity is constraining and obtain similar results.     

Risk Science Contributions: Three Illustrating Examples

This article aims to demonstrate that risk science is important for society, industry and all of us. Rather few people today, including scientists and managers, are familiar with what this science is about—its foundation and main features—and how it is used to gain knowledge and improve communication and decision making in real-life situations. The article seeks to meet this challenge, by presenting three examples, showing how risk science works to gain new generic, fundamental knowledge on risk concepts, principles, and methods, as well as supporting the practical tackling of actual risk problems.     

On the Discrete Version of the Aumann–Shapley Cost‐Sharing Method

Each agent in a finite set requests an integer quantity of an idiosyncratic good; the resulting total cost must be shared among the participating agents. The Aumann–Shapley prices are given by the Shapley value of the game where each unit of each good is regarded as a distinct player. The Aumann–Shapley cost‐sharing method charges to an agent the sum of the prices attached to the units she consumes. We show that this method is characterized by the two standard axioms of Additivity and Dummy, and the property of No Merging or Splitting: agents never find it profitable to split or to merge their consumptions. We offer a variant of this result using the No Reshuffling condition: the total cost share paid by a group of agents who consume perfectly substitutable goods depends only on their aggregate consumption. We extend this characterization to the case where agents are allowed to consume bundles of goods.     

Consistent Probabilistic Social Choice

Two fundamental axioms in social choice theory are consistency with respect to a variable electorate and consistency with respect to components of similar alternatives. In the context of traditional non‐probabilistic social choice, these axioms are incompatible with each other. We show that in the context of probabilistic social choice, these axioms uniquely characterize a function proposed by Fishburn (1984). Fishburn's function returns so‐called maximal lotteries, that is, lotteries that correspond to optimal mixed strategies in the symmetric zero‐sum game induced by the pairwise majority margins. Maximal lotteries are guaranteed to exist due to von Neumann's Minimax Theorem, are almost always unique, and can be efficiently computed using linear programming.     

INVENTORY RATIONING AND SHIPMENT FLEXIBILITY ALTERNATIVES FOR DIRECT MARKET FIRMS

This paper investigates inventory‐rationing policies of interest to firms operating in a direct market channel. We model a single product with two demand classes, where one class requests a lower order fulfillment lead time but pays a higher price. Demand for each class follows a Poisson process. Inventory is fed by a production system with exponentially distributed build times. We study rationing policies in which the firm either blocks or backlogs orders for the lower priority customers when inventory drops below a certain level. We compare the performance of these rationing policies with a pure first‐come, first‐serve policy under various scenarios for customer response to delay: lost sales, backlog, and a combination of lost sales and backlog.     

Equilibrium Bias of Technology

This paper presents three sets of results about equilibrium bias of technology. First, I show that when the menu of technological possibilities only allows for factor‐augmenting technologies, the increase in the supply of a factor induces technological change relatively biased toward that factor—meaning that the induced technological change increases the relative marginal product of the factor becoming more abundant. Moreover, this induced bias can be strong enough to make the relative marginal product of a factor increasing in response to an increase in its supply, thus leading to an upward‐sloping relative demand curve. I also show that these results about relative bias do not generalize when more general menus of technological possibilities are considered. Second, I prove that under mild assumptions, the increase in the supply of a factor induces technological change that is absolutely biased toward that factor—meaning that it increases its marginal product at given factor proportions. The third and most important result in the paper establishes the possibility of and conditions for strong absolute equilibrium bias—whereby the price (marginal product) of a factor increases in response to an increase in its supply. I prove that, under some regularity conditions, there will be strong absolute equilibrium bias if and only if the aggregate production function of the economy fails to be jointly concave in factors and technology. This type of failure of joint concavity is possible in economies where equilibrium factor demands and technologies result from the decisions of different agents.     

Exploring work- and organization-based resources as moderators between work–family conflict,well-being,and job attitudes

Abstract

In modern Western life it is difficult to avoid work–family conflict. Therefore the resources that might reduce its negative outcomes on well-being and job attitudes come into focus. Our study contributes to the work–family conflict literature by exploring the indirect (moderator) and direct role of three work- and organization-related resources, i.e., job control, family supportive climate, organization-based self-esteem (OBSE), in the work-to-family conflict and well-being/job attitude relationship. Theoretically, the study tested the recently developed Job Demands–Resources (JD-R) model in the Scandinavian context. Data for the study were gathered from three differing Finnish organizations (health care district, ICT company, Cardboard mill; n=1252). In line with the predictions of the JD-R model, job demands (time- and strain-based work-to-family conflict) were more robustly associated with strain-based outcomes (physical symptoms), whereas job resources (job control, family supportive climate, OBSE) were more strongly linked to motivational-based outcomes (job satisfaction, organizational commitment). Both job control and family supportive climate moderated the relationships studied; high job control and family supportive climate buffered against the aversive effects of work-to-family conflict on well-being and job attitudes. These indirect effects also varied in relation to the independent, moderator, and dependent variables. However, OBSE did not operate as a buffering factor, although it showed significant direct effects. From a practical viewpoint, our findings suggest that job control and family supportive climate are resources that help employees to reduce the negative effects related to work–family conflict.     

Inventory Sharing in the Presence of Commodity Markets

This study investigates the value of inventory sharing in the presence of spot and forward markets. We consider a multi‐period setting where two firms process a common commodity to meet stochastic demands. They can buy and sell the commodity through both the spot and forward markets. They can also share the commodity if one has leftover inventory while the other has excess demand. We first characterize the equilibrium strategies of the two firms. Our analysis reveals that in such a context, the value of inventory sharing is low when the forward price is directly used to value the sharing transactions. We then develop a structured trans‐shipment price scheme that uses a linear combination of the spot and forward prices. We show that this method can substantially increase the value of inventory sharing. Our analysis also reveals that in the presence of liquid spot and forward markets, the value of inventory sharing mainly results from the difference of the transaction costs, and it increases if the market in which firms operate becomes more competitive.     

Hedonism versus accuracy: the influence of motivation and affect on the evaluation of multiple gains and losses

The perceived value of multiple gains and losses may be influenced by a perceiver’s goals or affective state. In this research, insights from prospect theory were combined with the heuristic-systematic model to shed light on the information-processing strategies that underlie motivated and affect-related preference formation in the context of valuating multiple gains and losses. Specifically, findings from two experiments examine the influence of motivation and affect on preferences for segregated versus integrated gains and losses. In the first experiment—consistent with hypotheses—accuracy motivation was found to induce systematic processing for gains. The mixed results in the loss condition are explained with the influence of negative affect. Overall, the evidence supports the notion that people’s value functions might be more flexible than predicted by prospect theory, depending on people’s current goals. The second experiment substantiates these findings, identifying the influence of negative versus positive affect on the valuation of gains and losses. The results suggest that mood-management determines information processing and preferences depending on the congruence of the valence of affect (e.g. negative such as sadness) and the valence event (e.g. a positive event such as a gain). From a managerial perspective these studies add to practical knowledge on price communication, bundling, surcharges, or sequences of payments. When setting prices, salaries or other compensation schemes managers should consider whether their target group tends to be more accuracy or more feeling motivated.     

Information Acquisition and Voluntary Disclosure in an Export‐Processing System

We study a strategic information management problem in the export‐processing trade, where the buyer controls the raw material input and sales and the producer is responsible for production. The production is vulnerable to random yield risk. The producer can exert a costly effort to acquire the private yield rate information and discretionarily share it with the buyer. We develop a sequential Bayesian game model that captures three key features of the system—endogenous information endowment, voluntary disclosure, and ex post information sharing—a significant departure from the literature. The optimal disclosure strategy is driven by the trade‐off between the gains from Pareto efficiency improvement and self‐interested overproduction. It is specified by two thresholds on yield rate: only the middle‐yield producers (with yield rate between these two thresholds) share private information to improve supply‐demand match; the low‐ and high‐yield producers withhold information to extract excess input from the buyer. The buyer in response penalizes nondisclosure with reduced input and rewards information sharing with a larger order. This strategic interaction is further exacerbated by the double marginalization effect from decentralization, resulting in severe efficiency loss. We examine the effectiveness of three corrective mechanisms—vertical integration, mandatory disclosure, and production restriction—and reveal the costs of information suppressive effect and overinvestment incentive and the benefit from concessions on the processing fee. Our study endogenizes the asymmetric supply risk and provides the first attempt to rationalize the strategic interactions of informational and operational incentives in the export‐processing system.     

An efficient generalized network-simplex-based algorithm for manufacturing network flows

Fang and Qi (Optim. Methods Softw. 18:143–165, 2003) introduced a new generalized network flow model called manufacturing network flow model for manufacturing process modeling. A key distinguishing feature of such models is the assembling of component raw-materials, in a given proportion, into an end-product. This assembling operation cannot be modeled using usual generalized networks (which allow gains and losses in flows), or using multi-commodity networks (which allow flows of multiple commodity types on a single arc). The authors developed a network-simplex-based algorithm to solve a minimum cost flow problem formulated on such a generalized network and indicated systems of linear equations that need to be solved during the course of the network-simplex-based solution procedure. In this paper, it is first shown how various steps of the network-simplex-based solution procedure can be performed efficiently using appropriate data structures. Further, it is also shown how the resulting system of linear equations can be solved directly on the generalized network.     

Competitive industrial marketing strategies

This paper argues that for firms marketing industrial goods, the terms—system, product, service and commodity—are better employed to characterize the way the firm competes rather than any intrinsic attributes of what it markets. It is shown that the same hardware can be transacted as a system, service, product of commodity, and the nature of the most popular transaction changes over time. The nature of these shifts and how the firm needs to match its strategy to reflect them are discussed, and the special case of diversified firms in industries subject to rapid transaction shifts is taken up. It is suggested that for such firms a divisional structure based on the type of transaction—‘transaction divisions’—rather than the conventional Product Type divisions may make the firm better able not only to match its strategy to such shifts but also better able to anticipate them.     

Die systematische Entstehung von versicherungsmathematischen Gewinnen und Verlusten bei der Bewertung von Pensionsverpflichtungen

The accounting for pension obligations is based upon numerous parameters, whose future developments must be forecasted for valuation purposes. If the actual realizations of theses parameters deviate from their original estimations there are generated so-called actuarial gains and losses. IAS 19 provides three alternative accounting treatments with respect to these actuarial gains and losses. In particular the equity and the corridor approach, both frequently used in practice, implicitly assume that the actuarial gains and losses offset each other in the long run. However different studies have demonstrated by using the Monte-Carlo-Simulation-technique that this long-term offset is not assured. But those studies do not propose a rationale for the observed generation of systematic actuarial gains and losses. The present paper provides an analytic rationale for the systematic appearance of actuarial gains and losses and comes to the following conclusion: The long-term offset of actuarial gains and losses is assured only if the parameters that must be estimated for valuation purposes are independent. However if there is an interdependence between those parameters, which seems to be a sound assumption in reality, the offset of actuarial gains and losses is not given. In case of a positive correlation actuarial losses are generated on a systematic basis, whereas a negative correlation results in actuarial gains.     

Multiple Interacting Risk Factors: On Methods for Allocating Risk Factor Interactions

A persistent problem in health risk analysis where it is known that a disease may occur as a consequence of multiple risk factors with interactions is allocating the total risk of the disease among the individual risk factors. This problem, referred to here as risk apportionment, arises in various venues, including: (i) public health management, (ii) government programs for compensating injured individuals, and (iii) litigation. Two methods have been described in the risk analysis and epidemiology literature for allocating total risk among individual risk factors. One method uses weights to allocate interactions among the individual risk factors. The other method is based on risk accounting axioms and finding an optimal and unique allocation that satisfies the axioms using a procedure borrowed from game theory. Where relative risk or attributable risk is the risk measure, we find that the game‐theory‐determined allocation is the same as the allocation where risk factor interactions are apportioned to individual risk factors using equal weights. Therefore, the apportionment problem becomes one of selecting a meaningful set of weights for allocating interactions among the individual risk factors. Equal weights and weights proportional to the risks of the individual risk factors are discussed.     

A Theory of Disagreement in Repeated Games With Bargaining

This paper proposes a new approach to equilibrium selection in repeated games with transfers, supposing that in each period the players bargain over how to play. Although the bargaining phase is cheap talk (following a generalized alternating‐offer protocol), sharp predictions arise from three axioms. Two axioms allow the players to meaningfully discuss whether to deviate from their plan; the third embodies a “theory of disagreement”—that play under disagreement should not vary with the manner in which bargaining broke down. Equilibria that satisfy these axioms exist for all discount factors and are simple to construct; all equilibria generate the same welfare. Optimal play under agreement generally requires suboptimal play under disagreement. Whether patient players attain efficiency depends on both the stage game and the bargaining protocol. The theory extends naturally to games with imperfect public monitoring and heterogeneous discount factors, and yields new insights into classic relational contracting questions.     

A Cooperative Savings Game Approach to a Time Sensitive Capacity Allocation and Scheduling Problem

We consider a competitive scheduling setting with arbitrary number of agents each having the option to utilize two parallel resources to satisfy its demand: (i) an in‐house resource dedicated to process only the tasks of each specific agent, and (ii) a flexible resource capable of processing all agents' workloads. In a noncooperative setting, each agent would determine how much of its demand it will subcontract to the flexible resource with the objective to deliver its entire demand as quickly as possible subject to the priority rules set by the owner of the flexible resource (i.e., third‐party). In this study, we also allow for agents to coalesce with other agents and update their initial subcontracting decisions to attain rescheduling savings. Evidently, a grand coalition of all agents can coordinate to achieve the maximum savings possible, but the resulting schedule may yield individual losses for a subset of agents (which we refer to as “losers”), thus necessitating a transfer payment scheme to distribute the rescheduling savings among the agents in an equitable way. We model the rescheduling interactions among the agents as a cooperative savings game, and propose savings distribution schemes that invoke the core allocation concept.