How Price Dispersion Changes When Upgrades Are Introduced: Theory and Empirical Evidence from the Airline Industry

2019 ◽  
Vol 65 (8) ◽  
pp. 3835-3852 ◽  
Author(s):  
Yao Cui ◽  
A. Yeşim Orhun ◽  
Izak Duenyas
Keyword(s):  
Operations Management ◽  
Airline Industry ◽  
Price Dispersion ◽  
Consumer Welfare ◽  
Data Set ◽  
Differentiation Strategy ◽  
Valuation Effect ◽  
Price Distribution ◽  
The One ◽  
The Impact

This paper studies the effect of introducing a new vertical differentiation strategy, paying for an upgrade to a premium product after purchasing the base product, on the price dispersion of the base product arising from existing price discrimination strategies. In particular, we examine how a major U.S. airline’s price dispersion in the coach cabin changes after introducing the option to upgrade to a new type of premium economy seating within the coach cabin. We first provide a theoretical analysis that highlights two competing pressures that the new premium economy seating upgrades created on coach class prices. On the one hand, the airline benefits from lowering its prices because by allowing more customers to purchase in the first place, it increases the probability of selling upgrades (admission effect). On the other hand, for some customers, the value of flying with the airline increases because of the upgrade availability, therefore the airline may find it optimal to increase its prices (valuation effect). In the second part of the paper, we conduct an empirical investigation of the impact of upgrade introduction on coach class prices, based on a proprietary transaction-level data set from a major U.S. airline company. The empirical analysis tests the main predictions of our theoretical model and examines further nuances. The results show that the introduction of the premium economy seating upgrades is associated with an increase in the price dispersion and revenues in the coach class, the admission effect is stronger than the valuation effect on the low end of the price distribution, and the opposite is true on the high end of the price distribution. Finally, we discuss implications of our results for firm revenues and consumer welfare. This paper was accepted by Serguei Netessine, operations management.

Does Water Scarcity Affect Environmental Performance? Evidence from Manufacturing Facilities in Texas

2021 ◽  
Author(s):  
Suresh Muthulingam ◽  
Suvrat Dhanorkar ◽  
Charles J. Corbett
Keyword(s):  
Water Scarcity ◽  
Operations Management ◽  
Environmental Performance ◽  
Data Set ◽  
Full Sample ◽  
Toxic Releases ◽  
Manufacturing Operations ◽  
Toxic Emissions ◽  
Manufacturing Facilities ◽  
The Impact

It is well known that manufacturing operations can affect the environment, but hardly any research explores whether the natural environment shapes manufacturing operations. Specifically, we investigate whether water scarcity, which results from environmental conditions, influences manufacturing firms to lower their toxic releases to the environment. We created a data set that spans 2000–2016 and includes details on the toxic emissions of 3,092 manufacturing facilities in Texas. Additionally, our data set includes measures of the water scarcity experienced by these facilities. Our econometric analysis shows that manufacturing facilities reduce their toxic releases into the environment when they have experienced drought conditions in the previous year. We examine facilities that release toxics to water as well as facilities with no toxic releases to water. We find that the reduction in total releases (to all media) is driven mainly by those facilities that release toxic chemicals to water. Further investigation at a more granular level indicates that water scarcity compels manufacturing facilities to lower their toxic releases into media other than water (i.e., land or air). The impact of water scarcity on toxic releases to water is more nuanced. A full-sample analysis fails to link water scarcity to lower toxic releases to water, but a further breakdown shows that manufacturing facilities in counties with a higher incidence of drought do lower their toxic releases to water. We also find that facilities that release toxics to water undertake more technical and input modifications to their manufacturing processes when they face water scarcity. This paper was accepted by David Simchi-Levi, operations management.

The Bullwhip Effect in Supply Networks

2021 ◽  
Author(s):  
Nikolay Osadchiy ◽  
William Schmidt ◽  
Jing Wu
Keyword(s):  
Operations Management ◽  
Aggregate Demand ◽  
Bullwhip Effect ◽  
Data Set ◽  
Supplier Relationships ◽  
Supply Networks ◽  
Customer Base ◽  
Base Management ◽  
Demand Variability ◽  
The Impact

We offer a new network perspective on one of the central topics in operations management—the bullwhip effect (BWE). The topic has both practical and scholarly implications. We start with an observation: the variability of orders placed to suppliers is larger than the variability of sales to customers for most firms, yet the aggregate demand variability felt by suppliers upstream does not amplify commensurably. We hypothesize that changes to the supplier’s customer base can smooth out its aggregate demand. We test the hypothesis with a data set that tracks the evolution of supply relationships over time. We show that the effect of customer base management extends beyond the statistical benefits of aggregation. In particular, both the formation and the dissolution of customer-supplier relationships are associated with the smoothing of the aggregate demand experienced by suppliers. This provides fresh insight into how firms may leverage their customer-supplier relationships to mitigate the impact of the BWE. This paper was accepted by Jay Swaminathan, operations management.

What drives international remittances to Africa

2016 ◽  
Vol 7 (3) ◽  
pp. 397-418
Author(s):  
John Bosco Nnyanzi
Keyword(s):  
Gravity Model ◽  
Poverty Reduction ◽  
Institutional Environment ◽  
Policy Formulation ◽  
Data Set ◽  
Content Type ◽  
International Remittances ◽  
Self Interest ◽  
The One ◽  
The Impact

Purpose The purpose of this paper is to investigate the macro-economic and institutional drivers of remittance inflows to Africa. Design/methodology/approach The paper uses an enhanced gravity model in a random effects framework to test two hypotheses dominant in literature as well as the institutional quality hypothesis. A bilateral data set is created from the most recent available remittance data set to afford the capture of the impact of the selected macro-economic variables from both the host and recipient countries. Findings The results provide support for the trio hypotheses. A key finding is the co-existence of altruism and self-interest motives. Also, control of corruption, financial development and a reduction in unofficial economic activity are observed to facilitate remittance inflows. The authors confirm the resilience of remittances during the global crisis and document a positive significant relationship between remittance inflows on the one hand and host migration stock, age dependency, etc., on the other. Practical implications This paper generates various insights in the design of relevant macro-economic and institutional policies to enhance remittance inflows and the productive use of the same for purposes of economic growth and development via poverty reduction and secure resource flow. Originality/value The majority of previous studies on the determinants of remittance inflows have basically focussed on the microeconomic variables, an approach that could understate the macro-economic impact of remittances and lead to inadequate policy formulation. The use of an enhanced gravity model on a newly created bilateral data set in the analysis is a nuance in the economics of remittances. Besides, previous studies have often ignored the institutional environment as critical in the remittance-determinant model.

The Impact of Workload on Operational Risk: Evidence from a Commercial Bank

2021 ◽  
Author(s):  
Yuqian Xu ◽  
Tom Fangyun Tan ◽  
Serguei Netessine
Keyword(s):  
Commercial Bank ◽  
Error Rate ◽  
Operations Management ◽  
Financial Services ◽  
Operational Risk ◽  
Data Set ◽  
Risk Event ◽  
Significant Performance ◽  
The Impact ◽  
The Empirical Analysis

Operational risk has been among the three most significant types of risks in the financial services industry, and its management is mandated by Basel II regulations. To inform better labor decisions, this paper studies how workload affects banks’ operational risk event occurrence. To achieve this goal, we use a unique data set from a commercial bank in China that contains 1,441 operational risk events over 16 months. We find that workload has a U-shaped impact on operational risk error rate. More specifically, the error rate of operational risk events decreases first, as workload increases, and then increases. Furthermore, when workload is low, employees tend to make performance-seeking risks; however, when workload is high, employees tend to exhibit quality degradation due to cognitive multitasking. Based on the causal relationship between workload and operational risk events from the empirical analysis, we discuss staffing policies among branches aimed at reducing operational risk losses. We find that employing a flexible staffing rule can significantly reduce the number of operational risk events by 3.2%–10% under different scenarios. In addition, this significant performance improvement can be achieved by adding even a little bit of flexibility to the process by allowing employees to either switch their business lines in the same branch or switch branches within the same business lines on a quarterly basis. This paper was accepted by Vishal Gaur, operations management.

scholarly journals Where does implementation lie? Assessing the determinants of delegation and discretion in post-Maastricht European Union

2020 ◽  
pp. 1-22
Author(s):  
Marta Migliorati
Keyword(s):  
European Union ◽  
Majority Voting ◽  
The European Union ◽  
Data Set ◽  
Several Variables ◽  
Qualified Majority ◽  
The One ◽  
Council Of Ministers ◽  
The Impact ◽  
Selection Of

Abstract Drawing on a principal–agent framework the article analyses the European Union (EU) politics of delegation in the post-Maastricht era. By means of statistical analysis, it tests the impact of several variables upon the selection of national and supranational agents, as well as on the discretion they enjoy, on the basis of a recently collected data set of EU laws. Findings reveal that pooling and policy complexity favour the involvement of supranational actors in the implementation of EU laws. Moreover, the degree of supranational integration of a policy affects the likelihood of choosing supranational implementers. On the one hand, the Commission enjoys higher discretion vis-à-vis national actors when qualified majority voting applies, and when higher levels of conflict in the Council of Ministers is present. On the other, conflict between the European Parliament and the Council under codecision seems associated with lower supranational discretion, although the result needs further corroboration.

The Supply Network and Price Dispersion in the Canadian Gasoline Market

2018 ◽  
Vol 17 (2) ◽  
pp. 75-107
Author(s):  
Brandon Malloy
Keyword(s):  
Lower Cost ◽  
Price Dispersion ◽  
Gasoline Prices ◽  
Supply Network ◽  
Data Set ◽  
Retail Gasoline ◽  
Regional Effects ◽  
Equivalent Effect ◽  
Price Differences ◽  
The Impact

Abstract This paper examines the impact of variation in transportation options – what I denote the “supply network” – on observed price differences between locations for a specific good, retail gasoline. I use a unique data set of weekly gasoline prices across 44 Canadian cities to analyze how the existence of variation in the available modes of transportation for gasoline between cities (via pipeline, marine tanker, rail or truck) accounts for observed price differences across locations. I find that the supply network is significant – cities connected by lower cost-per-unit methods like pipelines or seaports exhibit smaller mean- and weekly-price differences than those connected only by road or rail, after controlling for distance, regional effects and market size. A pipeline connection results in a reduction in weekly price dispersion equivalent to a 53% reduction in distance between cities, while a maritime connection has the equivalent effect of a 38% reduction in distance between cities.

Distance and Local Competition in Mobile Geofencing

2020 ◽  
Vol 31 (4) ◽  
pp. 1421-1442
Author(s):  
Yi-Jen (Ian) Ho ◽  
Sanjeev Dewan ◽  
Yi-Chun (Chad) Ho
Keyword(s):  
Mobile Apps ◽  
Consumer Welfare ◽  
Location Based Services ◽  
Data Set ◽  
New Era ◽  
Local Competition ◽  
Two Factors ◽  
Surrounding Areas ◽  
Rich Data ◽  
The Impact

The growing ubiquity of GPS-enabled smartphones has ushered in a new era of location-based services and online-to-offline commerce. Geofencing is one instance of this broader phenomenon, and it is being widely adopted in the context of retail, restaurant, entertainment, and other local services. By targeting users on mobile apps while they are in the vicinity of physical establishments, there is potential for higher levels of engagement and consumption of the products or services on offer. However, the level of consumer interest is likely to depend on distance from the establishment and local competition in the surrounding areas. This study examines the impact of these two factors on consumer response to geofence advertising at different points in the purchase funnel, namely the click stage and conversion phase. Analyzing a rich data set from one of the leading location-based marketing agencies and using a sophisticated Bayesian empirical methodology, we find that having one more competitor in the consumer’s vicinity reduces click-through rate by about 1%, and a 1-mile increase in distance is associated with a 17.6% reduction in conversion rate. These and other results suggest that accounting for distance and local competition in data-analytic mobile targeting would increase both the return on advertising spend and consumer welfare.

When You Work with a Superman, Will You Also Fly? An Empirical Study of the Impact of Coworkers on Performance

2019 ◽  
Vol 65 (8) ◽  
pp. 3495-3517 ◽  
Author(s):  
Tom Fangyun Tan ◽  
Serguei Netessine
Keyword(s):  
Operations Management ◽  
Peer Effects ◽  
Sales Performance ◽  
Sales Managers ◽  
Ability Level ◽  
Data Set ◽  
Ability Levels ◽  
The Impact ◽  
Total Sales ◽  
Operational Data

We examine a large operational data set in a casual restaurant setting to study how coworkers’ sales ability level affects other workers’ sales performance. We find that waiters react nonlinearly to their coworkers’ ability. In particular, when coworkers’ overall sales ability is low, increasing this ability may prompt waiters to redouble both upselling and cross-selling efforts. When overall coworkers’ ability is high, however, further increasing their ability may trigger waiters to reduce sales efforts. Our empirical findings imply that, to maximize sales, managers should mix waiters with heterogeneous ability levels during the same shift. Through a counterfactual analysis, we find that considering the inverted U-shaped peer effects when optimizing current waiters’ schedules without changing their utilization may increase total sales by approximately 2.48% at no extra cost. This paper was accepted by Vishal Gaur, operations management.

The impact of service quality, customer engagement and selected marketing constructs on airline passenger loyalty

2017 ◽  
Vol 9 (1) ◽  
pp. 21-40 ◽  
Author(s):  
Raditha Hapsari ◽  
Michael D. Clemes ◽  
David Dean
Keyword(s):  
Customer Satisfaction ◽  
Service Quality ◽  
Customer Loyalty ◽  
Airline Industry ◽  
Perceived Value ◽  
Customer Engagement ◽  
Data Set ◽  
Content Type ◽  
Airline Passenger ◽  
The Impact

Purpose This study aims to empirically analyse the determinants of airline passenger loyalty in the high-frills Indonesian airline industry. The interrelationships among passenger loyalty, customer engagement, customer satisfaction, brand image, perceived value and service quality are identified and discussed. Design/methodology/approach The perceptions of 250 Indonesian airline passengers were used to examine the interrelationships among the constructs. The data set was analysed using confirmatory factor analysis and structural equation modelling. Findings The empirical results demonstrate that customer engagement has the most influential effect on passenger loyalty, followed by customer satisfaction. Customer satisfaction has the largest total effect on customer engagement. Service quality, perceived value and customer satisfaction also indirectly affect customer loyalty through mediation. Originality/value The integration of the customer engagement construct with the other important marketing constructs comprehensively explains the role of customer engagement on customer loyalty. The effects of the important marketing constructs on customer loyalty are not only explained in the direct relationships but also in indirect relationships through mediation.

Testing at the Source: Analytics-Enabled Risk-Based Sampling of Food Supply Chains in China

2021 ◽  
Author(s):  
Cangyu Jin ◽  
Retsef Levi ◽  
Qiao Liang ◽  
Nicholas Renegar ◽  
Stacy Springs ◽  
...  
Keyword(s):  
Food Safety ◽  
Operations Management ◽  
Important Application ◽  
Structured Data ◽  
Data Set ◽  
Food Supply Chains ◽  
Aquatic Products ◽  
Current Test ◽  
Operational Decision Making ◽  
The Impact

This paper illustrates how supply chain (SC) analytics could provide strategic and operational insights to evaluate the risk-based allocation of regulatory resources in food SCs, for management of food safety and adulteration risks. This paper leverages data on 89,970 tests of aquatic products extracted from a self-constructed data set of 2.6 million food safety tests conducted by the China Food and Drug Administration (CFDA) organizations. The integrated and structured data set is used to conduct innovative analysis that identifies the sources of adulteration risks in China’s food SCs and contrasts them with the current test resource allocations of the CFDA. The analysis highlights multiple strategic insights. Particularly, it suggests potential gaps in the current CFDA testing allocation by SC location, which is heavily focused on retail and supermarkets. Instead, the analysis indicates that high-risk parts of the SC, such as wholesale and wet markets, are undersampled. Additionally, the paper highlights the impact that SC analytics could have on policy-level operational decision making to regulate food SCs and manage food safety. The hope is that the paper will stimulate the interest of academics with expertise in these areas to conduct more work in this important application domain. This paper was accepted by Charles Corbett, operations management.

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