Price and service competition with maintenance service bundling

In many equipment manufacturing industries, firms compete with each other not only on products price, but also on maintenance service. More and more traditional products oriented firms are offering their customers products bundled with maintenance service (P&S bundles). In this study, we examine firms’ incentive to offer customers products bundling with long-term maintenance or repair support service in a duopoly competitive environment. When providing P&S bundles, a firm need to determine the service level (in terms of average response time guarantee for the service in this paper) to offer and needs to build a service facility to handle the maintenance service requirements. Based on the analysis of three sub-game models, we characterize the market conditions in which only one firm, both firms or neither firm will offer P&S bundles. Finally, we analyze the affects of several market factors on firms’ strategy choices

Efficiency Analysis of Cournot Competition in Service Industries with Congestion

We consider Cournot competition in the presence of congestion effects. Our model consists of several service providers with differentiated services, each competing for users who are sensitive to both price and congestion. We distinguish two types of congestion effects, depending on whether spillover costs exist, that is, where one service provider's congestion cost increases with the other providers' output level. We quantify the efficiency of an unregulated oligopoly with respect to the optimal social welfare with tight upper and lower bounds. We show that, when there is no spillover, the welfare loss in an unregulated oligopoly is limited to 25% of the social optimum, even in the presence of highly convex costs. On the other hand, when spillover cost is present, there does not exist a constant lower bound on the efficiency of an unregulated oligopoly, even with affine cost. We show that the efficiency depends on the relative magnitude between the marginal spillover cost and the marginal benefit to consumers

Analyzing the proposed reconfiguration of accident-and-emergency facilities in England

The Keogh Report of 2013 proposed a major reconfiguration of the accident and emergency (A&E) system under National Health Service (NHS) England to improve service. The proposed reconfiguration includes centralized facilities with multiple specialties as well as small local minor-injury facilities. We use stylized queuing models to analyze cost and service implications of the proposed reconfiguration. We find that increasing numbers of specialty patients that require admission to hospital makes splitting off specialty A&Es from general ones more attractive. The same applies for patients with minor injuries. Our work generally supports the reconfiguration recommended in the Keogh report but with some fine-tuning: For instance, a merger of A&Es (pooling) does not always make sense even though it increases patient numbers when the patients in the two A&Es are of different types. We provide simple quantitative rules to indicate whether the proposed reconfiguration could lower costs in any particular region of the country. The results here are consistent with some NHS England providers attempting specialty A&Es for geriatric patients and mobile drunkenness treatment centers on weekends. Our rules and approach can be useful for identifying candidate reconfiguration opportunities not only for NHS England but also for any other context where pooling and arrival heterogeneity are important considerations

Can Yardstick Competition Reduce Waiting Times?

Yardstick competition is a regulatory scheme for local monopolists (e.g., hospitals), where the monopolist's reimbursement is linked to performance relative to other equivalent monopolists. This regulatory scheme is known to provide cost-reduction incentives and serves as the theoretical underpinning behind the hospital prospective reimbursement system used throughout the developed world. This paper uses a game-theoretic queueing model to investigate how yardstick competition performs in service systems (e.g., hospital emergency departments), where in addition to incentivizing cost reduction the regulator wants to incentivize waiting time reduction. We first show that the form of cost-based yardstick competition used in practice results in inefficiently long waiting times. We then demonstrate how yardstick competition can be appropriately modified to achieve the dual goal of cost and waiting-time reduction. In particular, we show that full efficiency (first-best) can be restored if the regulator makes the providers' reimbursement contingent on their service rates and is also able to charge a provider-specific "toll" to consumers. More importantly, if such a toll is not feasible, as may be the case in healthcare, we show that there exists an alternative and particularly simple yardstick-competition scheme, which depends on the average waiting time only, that can significantly improve system efficiency (second-best). This scheme is easier to implement as it does not require the regulator to have detailed knowledge of the queueing discipline. We conclude with a numerical investigation that provides insights on the practical implementation of yardstick competition for hospital Emergency Departments and also present a series of modelling extensions

Modelización y análisis económicos de servicios 5G basados en "network slicing"

Gonzalez Chiriboga, CV. (2018). Modelización y análisis económicos de servicios 5G basados en "network slicing". http://hdl.handle.net/10251/112998Archivo delegad

Modelización y análisis económicos de servicios 5G basados en "network slicing"

[ES] Las redes 5G no sólo suponen la implantación de una nueva generación de tecnologías en las redes de acceso, principalmente inalámbricas, sino también la puesta en práctica de nuevos paradigmas de gestión de recursos de red de acceso y de red troncal. Uno de tales paradigmas es el "network slicing", que ofrecerá la posibilidad de que una misma infraestructura de red pueda soportar diversas redes virtuales, sobre cada una de las cuales un operador opera y presta un servicio de características específicas. El TFM se centra en la modelización de los usuarios, los operadores y los proveedores de infraestructuras desde el punto de vista económico, centrándose en los incentivos que determinan las decisiones de suscripción, de precio y de gestión de recursos. Las herramientas de análisis de este tipo de modelos son las de optimización y especialmente las de Teoría de Juegos.González Chiriboga, CV. (2018). Modelización y análisis económicos de servicios 5G basados en "network slicing". Universitat Politècnica de València. http://hdl.handle.net/10251/165141TFG

Co-opetition in Service Clusters with Waiting-Area Entertainment

Problem Definition: Unoccupied waiting feels longer than it actually is. Service providers operationalize this psychological principle by offering entertainment options in waiting areas. A service cluster with a common space provides firms with an opportunity to cooperate in the investment for providing entertainment options while competing on other service dimensions. Academic / Practical Relevance: Our paper contributes to the literature by being the first to examine co- opetition in a service setting, in addition to developing a novel model of waiting-area entertainment. It also sheds new light on the emerging practice of service clusters and small-footprint retailing. Methodology: Using a queueing theoretic approach, we develop a parsimonious model of co-opetition in a service cluster with a common space. Results: By comparing the case of co-opetition with two benchmarks (monopoly, and duopoly competition), we demonstrate that a service provider that would otherwise be a local monopolist can achieve higher prof- itability by joining a service cluster and engaging in co-opetition. Achieving such benefits, however, requires a cost-allocation scheme that properly addresses an efficiency-fairness tradeoff—the pursuit of fairness may backfire and lead to even lower profitability than under pure competition. Managerial Implications: We show that as much as co-opetition facilitates resource sharing in a service clus- ter, it heightens price competition. Furthermore, as the intensity of price competition increases, surprisingly, service providers may opt to charge higher service fees, albeit while providing a higher entertainment level

Price competition and the impact of service attributes: Structural estimation and analytical characterizations of equilibrium behavior

This dissertation addresses a number of outstanding, fundamental questions in operations management and industrial organization literature. Operations management literature has a long history of studying the competitive impact of operational, firm-level strategic decisions within oligopoly markets. The first essay reports on an empirical study of an important industry, the drive-thru fast-food industry. We estimate a competition model, derived from an underlying Mixed MultiNomial Logit (MNML) consumer choice model, using detailed empirical data. The main goal is to measure to what extent waiting time performance, along with price levels, brand attributes, geographical and demographic factors, impacts competing firms' market shares. The primary goal of our second essay is to characterize the equilibrium behavior of price competition models with Mixed Multinomial Logit (MMNL) demand functions under affine cost structures. In spite of the huge popularity of MMNL models in both the theoretical and empirical literature, it is not known, in general, whether a Nash equilibrium (in pure strategies) of prices exists, and whether the equilibria can be uniquely characterized as the solutions to the system of First Order Condition (FOC) equations. The third essay, which is the most general in its context, we establish that in the absence of cost efficiencies resulting from a merger, aggregate profits of the merging firms increase as do equilibrium prices for general price competition models with general nonlinear demand and cost functions as long as the models are supermodular, with two additional structural conditions: (i) each firm's profit function is strictly quasi-concave in its own price(s), and (ii) markets are competitive, i.e., in the pre-merger industry, each firm's profits increase when any of his competitors increases his price, unilaterally. Even the equilibrium profits of the remaining firms in the industry increase, while the consumer ends up holding the bag, i.e., consumer welfare declines. As demonstrated by this essay, the answers to these sorts of strategy questions have implications not only for the firms and customers but also the policy makers policing these markets

Price of anarchy in supply chains, congested systems and joint ventures

Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, Operations Research Center, 2012.Cataloged from PDF version of thesis.Includes bibliographical references (p. 169-174).This thesis studies the price of anarchy in supply chains, congested systems and joint ventures. It consists of three main parts. In the first part, we investigate the impact of imperfect competition with nonlinear demand. We focus on a distribution channel with a single supplier and multiple downstream retailers. To evaluate the performance, we consider several metrics, including market penetration, total profit, social welfare and rent extraction. We quantify the performance with tight upper and lower bounds. We show that with substitutes, while competition improves the efficiency of a decentralized supply chain, the asymmetry among the retailers deteriorates the performance. The reverse happens when retailers carry complements. We also show that efficiency of a supply chain with concave (convex) demand is higher (lower) than that with affine demand. The second part of the thesis studies the impact of congestion in an oligopoly by incorporating convex costs. Costs could be fully self-contained or have a spillover component, which depends on others' output. We show that when costs are fully self-contained, the welfare loss in an oligopoly is at most 25% of the social optimum, even in the presence of highly convex costs. With spillover cost, the performance of an oligopoly depends on the relative magnitude of spillover cost to the marginal benefit to consumers. In particular, when spillover cost outweighs the marginal benefit, the welfare loss could be arbitrarily bad. The third part of the thesis focuses on capacity planning with resource pooling in joint ventures under demand uncertainties. We distinguish heterogeneous and homogeneous resource pooling. When resources are heterogeneous, the effective capacity in a joint venture is constrained by the minimum individual contribution. We show that there exists a unique constant marginal revenue sharing scheme which induces the same outcome in a Nash equilibrium, Nash Bargaining and the system optimum. The optimal scheme rewards every participant proportionally with respect to his marginal cost. When resources are homogeneous, we show that the revenue sharing ratio should be inversely proportional to a participant's marginal cost.by Wei Sun.Ph.D