Oligopolistic contracting: Channel coordination under competition

We study contracts between a single retailer and multiple suppliers of two substitutable products, where suppliers have fixed capacities and present the retailer cost contracts for their supplies. After observing the contracts, the retailer decides how much capacity to purchase from each supplier, to maximize profits from the purchased capacity from the suppliers plus his possessed inventory (endowment). This is modeled as a noncooperative, nonzero‐sum game, where suppliers, or principals, move simultaneously as leaders and the retailer, the common agent, is the sole follower. We are interested in the form of the contracts in equilibrium, their effect on the total supply chain profit, and how the profit is split between the suppliers and the retailer. Under mild assumptions, we characterize the set of all equilibrium contracts and discuss all‐unit and marginal‐unit quantity discounts as special cases. We also show that the supply chain is coordinated in equilibrium with a unique profit split between the retailer and the suppliers. Each supplier's profit is equal to the marginal contribution of her capacity to supply chain profits in equilibrium. The retailer's profit is equal to the total revenue collected from the market minus the payments to the suppliers and the associated sales costs.     

Buy now,pay later: American military intervention and the strategic cost paradox

This paper explores the notion that US efforts to evade the political costs of war paradoxically contribute to the subsequent exacerbation of costs over time. Leaders seek to purchase political capital in the short term by limiting the costs and requirements of military operations, but in doing so cause strategic and political liabilities to mount in the long run. While identification of such behaviour is not new, insufficient attention has been devoted to explaining its causes, dynamics, and manifestations in relation to key decisions on and in war. Evidence derived from studies of recent American discretionary campaigns is analysed to advance an argument with respect to this pattern of self-defeating strategic behaviour.     

The Gravity of Arms

The aim of this paper is to investigate the determinants of international arms transfers in a gravity model framework. By distinguishing between the decision to export arms (extensive margin) and the value of the arms exported (intensive margin), while also considering its interdependence, is what differentiates this paper from previous research. A theoretically justified gravity model of trade augmented with political and security motives is estimated using a two-stage panel data approach for 104 exporting countries over the period from 1950 to 2007. In addition to the usual gravity variables related to the economic mass of the trading countries and the trade cost factors, the model is extended with political and security factors. The level of democracy in both trading partners, political differences between trading partners and voting similarity with the United States in the UN General Assembly of the countries engaged in trade are the main political factors, whereas the existence of conflicts, military pacts, and embargoes are taken as security motives. The key result indicates that both political and security motives are an important determinant of an arms trade, but their effects on the extensive margin of exports (the decision to order a transfer) differs from their effect on the intensive margin (average value of exports). Moreover, the relative importance of the factors under study has changed since 1989. In the post-cold war period, countries that are less democratic are more likely to export arms, military pacts are less relevant and embargoes play a role.     

On the roles of free play in army exercises and the Russians

The article outlines the essential role of free play elements in various types of exercises for the development of in-depth and practical military professionalism. It thereafter argues why such use of free play contradicts the military science founded Russian Way of War.     

Dynamic server assignment policies for assembly‐type queues with flexible servers

We seek dynamic server assignment policies in finite‐capacity queueing systems with flexible and collaborative servers, which involve an assembly and/or a disassembly operation. The objective is to maximize the steady‐state throughput. We completely characterize the optimal policy for a Markovian system with two servers, two feeder stations, and instantaneous assembly and disassembly operations. This optimal policy allocates one server per station unless one of the stations is blocked, in which case both servers work at the unblocked station. For Markovian systems with three stations and instantaneous assembly and/or disassembly operations, we consider similar policies that move a server away from his/her “primary” station only when that station is blocked or starving. We determine the optimal assignment of each server whose primary station is blocked or starving in systems with three stations and zero buffers, by formulating the problem as a Markov decision process. Using this optimal assignment, we develop heuristic policies for systems with three or more stations and positive buffers, and show by means of a numerical study that these policies provide near‐optimal throughput. Furthermore, our numerical study shows that these policies developed for assembly‐type systems also work well in tandem systems. © 2008 Wiley Periodicals, Inc. Naval Research Logistics, 2008     

The building evacuation problem with shared information

In this article, the Building Evacuation Problem with Shared Information (BEPSI) is formulated as a mixed integer linear program, where the objective is to determine the set of routes along which to send evacuees (supply) from multiple locations throughout a building (sources) to the exits (sinks) such that the total time until all evacuees reach the exits is minimized. The formulation explicitly incorporates the constraints of shared information in providing online instructions to evacuees, ensuring that evacuees departing from an intermediate or source location at a mutual point in time receive common instructions. Arc travel time and capacity, as well as supply at the nodes, are permitted to vary with time and capacity is assumed to be recaptured over time. The BEPSI is shown to be NP‐hard. An exact technique based on Benders decomposition is proposed for its solution. Computational results from numerical experiments on a real‐world network representing a four‐story building are given. Results of experiments employing Benders cuts generated in solving a given problem instance as initial cuts in addressing an updated problem instance are also provided. © 2008 Wiley Periodicals, Inc. Naval Research Logistics, 2008     

Estimating failure time distribution and its parameters based on intermediate data from a Wiener degradation model

Instead of measuring a Wiener degradation or performance process at predetermined time points to track degradation or performance of a product for estimating its lifetime, we propose to obtain the first‐passage times of the process over certain nonfailure thresholds. Based on only these intermediate data, we obtain the uniformly minimum variance unbiased estimator and uniformly most accurate confidence interval for the mean lifetime. For estimating the lifetime distribution function, we propose a modified maximum likelihood estimator and a new estimator and prove that, by increasing the sample size of the intermediate data, these estimators and the above‐mentioned estimator of the mean lifetime can achieve the same levels of accuracy as the estimators assuming one has failure times. Thus, our method of using only intermediate data is useful for highly reliable products when their failure times are difficult to obtain. Furthermore, we show that the proposed new estimator of the lifetime distribution function is more accurate than the standard and modified maximum likelihood estimators. We also obtain approximate confidence intervals for the lifetime distribution function and its percentiles. Finally, we use light‐emitting diodes as an example to illustrate our method and demonstrate how to validate the Wiener assumption during the testing. © 2008 Wiley Periodicals, Inc. Naval Research Logistics, 2008     

A search game taking account of attributes of searching resources

This article deals with a two‐person zero‐sum game called a search allocation game (SAG), in which a searcher and a target participate as players. The searcher distributes his searching resources in a search space to detect the target. The effect of resources lasts a certain period of time and extends to some areas at a distance from the resources' dropped points. On the other hand, the target moves around in the search space to evade the searcher. In the history of search games, there has been little research covering the durability and reachability of searching resources. This article proposes two linear programming formulations to solve the SAG with durable and reachable resources, and at the same time provide an optimal strategy of distributing searching resources for the searcher and an optimal moving strategy for the target. Using examples, we will analyze the influences of two attributes of resources on optimal strategies. © 2007 Wiley Periodicals, Inc. Naval Research Logistics 2008     

Dynamic inventory management with cash flow constraints

In this article, we consider a classic dynamic inventory control problem of a self‐financing retailer who periodically replenishes its stock from a supplier and sells it to the market. The replenishment decisions of the retailer are constrained by cash flow, which is updated periodically following purchasing and sales in each period. Excess demand in each period is lost when insufficient inventory is in stock. The retailer's objective is to maximize its expected terminal wealth at the end of the planning horizon. We characterize the optimal inventory control policy and present a simple algorithm for computing the optimal policies for each period. Conditions are identified under which the optimal control policies are identical across periods. We also present comparative statics results on the optimal control policy. © 2008 Wiley Periodicals, Inc. Naval Research Logistics 2008     

Dynamic capacity reservation and due date quoting in a make‐to‐order system

We consider a make‐to‐order manufacturer facing random demand from two classes of customers. We develop an integrated model for reserving capacity in anticipation of future order arrivals from high priority customers and setting due dates for incoming orders. Our research exhibits two distinct features: (1) we explicitly model the manufacturer's uncertainty about the customers' due date preferences for future orders; and (2) we utilize a service level measure for reserving capacity rather than estimating short and long term implications of due date quoting with a penalty cost function. We identify an interesting effect (“t‐pooling”) that arises when the (partial) knowledge of customer due date preferences is utilized in making capacity reservation and order allocation decisions. We characterize the relationship between the customer due date preferences and the required reservation quantities and show that not considering the t‐pooling effect (as done in traditional capacity and inventory rationing literature) leads to excessive capacity reservations. Numerical analyses are conducted to investigate the behavior and performance of our capacity reservation and due date quoting approach in a dynamic setting with multiple planning horizons and roll‐overs. One interesting and seemingly counterintuitive finding of our analyses is that under certain conditions reserving capacity for high priority customers not only improves high priority fulfillment, but also increases the overall system fill rate. © 2008 Wiley Periodicals, Inc. Naval Research Logistics, 2008