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We conducted a newsvendor experiment in which (i) the subjects were presented with multiple pieces of information that they could possibly use to anchor their decision and (ii) the subjects participated either as individuals or in groups of three. The primary objective was to determine whether the subjects tended to consistently anchor to the mean or change their anchor based on the experimental setting. The secondary objective was to study the impact of group dynamics on their decision-making approach. We observed that the subjects did not anchor to any one particular value, but rather chose an anchor that was closer to the optimal value. In addition, we observed that although there was no difference in their relative tendencies to anchor, the subjects in groups demonstrated a lower propensity for error than their individual counterparts.

ABSTRACTThe use of the Internet as an additional sales channel offers traditional retailers opportunities to reach expanded markets while improving the efficiency of their operations. Although the potential benefits of the online channel are clear, there are significant variations in the scope and depth of online channel use among retailers. Drawing from data on more than 100 publicly traded companies, this study examines the impact of online‐channel use on retailers' performance. The results suggest that the online channel provides significant improvements in sales, cost, inventory, and return on investments. In addition, we find that the timing of online‐channel adoption does not play a significant role in performance improvement, but having a local store presence does.

AbstractWe consider a dynamic pricing model in which the instantaneous rate of the demand arrival process is dependent on not only the current price charged by the concerned firm, but also the present state of the world. While reflecting the current economic condition, the state evolves in a Markovian fashion. This model represents the real‐life situation in which the sales season is relatively long compared to the fast pace at which the outside environment changes. We establish the value of being better informed on the state of the world. When reasonable monotonicity conditions are met, we show that better present economic conditions will lead to higher prices. Our computational study is partially calibrated with real data. It demonstrates that the benefit of heeding varying economic conditions is on par with the value of embracing randomness in the demand process. © 2015 Wiley Periodicals, Inc. Naval Research Logistics 66:73–89,2019

ABSTRACTWe study the distribution channel decision of a manufacturer who considers whether to add an online channel (direct channel) to its brick‐and‐mortar retailer (indirect channel). The retailer faces the opportunity to invest in store assistance to help consumers choose products and thus reduce product returns. Special attention is given to the impact of product returns and retailer's store assistance investment on manufacturer's dual channel decision. We examine conditions under which the manufacturer uses dual channels and how various relevant factors affect its channel decision under two settings, depending on whether the retailer has its own online store or not. When the retailer does not have its online store, we find that (i) the addition of the direct channel raises the wholesale price; (ii) the direct channel addition hurts the retailer if the nonreplacement rate is low; (iii) the manufacturer has a lower incentive to add the direct channel when the retailer's service cost is lower or its returns reduction rate from service investment is higher; and (iv) the manufacturer should treat its own returns handling cost as a key factor in its channel structure decision. In addition, when the retailer operates an online store, we find that the manufacturer may have an incentive to add a direct channel such that both firms own direct channels.

ABSTRACTIn this article, we consider distribution channel strategies for an incumbent manufacturer who produces two complementary products and must determine whether or not to have another company to sell its products. We identify factors that affect the manufacturer's motivation to use dual‐channel distribution. Our results show that both complementarity between complements and product substitutability between firms influence the manufacturer's channel strategy. We find that if the potential entrant does not produce the complement of the primary product, a higher complementary effect for the complement will weaken the motivation of the incumbent to add an indirect channel. We also find that the incumbent has a stronger incentive to add the indirect channel when a product's substitutability is high. Furthermore, we show that when the two channels have the same pricing power, the incumbent has a stronger incentive to sell through the indirect channel in a higher pricing power environment.

ABSTRACTThis article examines production and outsourcing decisions for two manufacturers that produce partially substitutable products and play a strategic game with quantity competition. When both manufacturers outsource key components to the same upstream supplier, their products become more substitutable due to the increased commonality of the products. In addition, outsourcing may create better consumer perception about the product if the manufacturers choose reputable suppliers with better brand or quality. We explicitly model the substitutability change and the brand/quality effect and provide conditions under which the manufacturers should outsource the components to a supplier. We present the subgame perfect Nash equilibriums for the situation in which there is only one supplier and the case in which two suppliers compete with each other in the upstream supply chain. Numerical examples are presented to illustrate the findings.