Dual Sourcing Inventory Systems: On Optimal Policies and the Value of Costless Returns

We study dual sourcing inventory systems with backordering and with stationary, stochastic demands. The two supply sources differ in their unit prices and lead times. We focus on the option of making costless returns to the cheaper, longer leadtime supplier. We show that the value of this option is zero. Our analysis leading to this result includes the derivation of several structural properties of the optimal policies for dual sourcing systems with and without the return option.     

Distressed Selling by Farmers: Model,Analysis, and Use in Policy‐Making

Among the various governmental schemes that support agriculture, support prices have been adopted by many developing countries. A support price for an agricultural crop is a guaranteed price at which a governmental entity agrees to purchase that crop from farmers. Despite this surety, a surprising practice of “distressed” selling 1 1 A 1‐minute news clip on distressed selling is available at: https://www.youtube.com/watch?v=U2lr5rBTpaU
has been widely observed in practice: Farmers sell a significant portion of their crops to outside agents at prices much lower than the support price. We build a tractable stochastic dynamic programming model that captures the salient features of the ground realities—limited as well as uncertain procurement capacity, high holding costs for the farmers, and lack of affordable credit—that conspire to induce distressed selling and, consequently, a significant loss of welfare of the farmers. Using real data on procurement under a support‐price program, we establish the accuracy of our model's prediction on the volume of distressed sales. Finally, we show how our model and its solution can serve as a simple and useful tool for policy‐makers to assess the relative impact of the improvements in the main determinants of distressed sales.