2004 JFIG Paper Competition

Winner

Optimal Investment Strategies for Flexible Resources, Considering Pricing and Correlated Demands
Ebru Bish and Qiong Wang, Grado Department of Industrial and Systems Engineering, Virginia Tech

We study the resource investment decision faced by a two-product firm, which utilizes ex-post pricing in a monopolistic situation. The firm can invest in dedicated resources, which can only satisfy a specific product, and/or in a more expensive, flexible resource, which can satisfy both products. Our analysis characterizes the structure of the firm's optimal resource investment portfolio as a function of demand parameters and investment costs, and provides managerial guidelines and principles.

Finalists

Competition for Procurement Contracts with Service Guarantees
Francis de Vericourt and Fernando Bernstein, The Fuqua School of Business, Duke University

A set of firms wants to establish long-term contracts with a group of suppliers. Each supplier’s ability to process the firms’ requests is constrained by her production capacity. When specifying the contracts, firms need to stipulate service delivery guarantees. We determine which set of contracts is allocated to each supplier.

Online Auction and List Price Revenue Management
Rene Caldentey and Gustavo Vulcano, Stern School of Business, NYU

We analyze a revenue management problem in which a seller, facing a Poisson arriving stream of rational customers, operates an online multiunit auction. The seller announces the auction duration, the reservation price, and the number of units to offer in order to maximize revenues. Besides the auction, customers have access to an alternative list price channel to buy the product. This list price channel can be either managed by the auctioneer or by another firm.

Poisson Disorder Problem with Exponential Penalty for Delay
Savas Dayanik , Department of Operations Research and Financial Engineering, Princeton University
Erhan Bayraktar, Department of Mathematics, University of Michigan

We solve the Poisson disorder problem when the delay is penalized exponentially. Our objective is to detect, as quickly as possible, the unobservable time of the change in the intensity of a Poisson process. The change point delimits two different regimes in which one employs distinct strategies (e.g., investment, advertising, manufacturing). We describe a stopping rule that minimizes the frequency of false alarms and an exponential cost function of the detection delay.

Shipper Valuation of Interstate Natural Gas Pipeline Point-to-Point Transportation Contracts
Nicola Secomandi, Tepper School of Business, Carnegie Mellon University

In the United States, interstate natural gas pipeline companies provide transportation services by stipulating contracts with shippers. Since these contracts link natural gas production with its local distribution and consumption, they play a fundamental role in the supply chain of this industry. The talk investigates how shippers should value and hedge them, with an emphasis on producers and local distribution companies.