Robert H. Smith School of Business
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Item Heuristics for Solving Three Routing Problems: Close-Enough Traveling Salesman Problem, Close-Enough Vehicle Routing Problem, Sequence-Dependent Team Orienteering Problem(2009) Mennell, William Kenneth; Golden, Bruce L.; Wasil, Edward A.; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this dissertation, we examine three important routing problems. In the second chapter we investigate the Close-Enough Traveling Salesman Problem (CETSP) in which a salesman must get within a specified radius of each node to visit it. The third chapter studies the multi-vehicle extension of the CETSP, the Close-Enough Vehicle Routing Problem (CEVRP). In the fourth chapter, we develop a post-processor to improve the accuracy of our heuristics for solving the CETSP and CEVRP. In the fifth chapter, we solve the Sequence-Dependent Team Orienteering Problem (SDTOP) in which the profit received for each node visited is dependent on the sequence in which all the nodes are visited. We summarize the dissertation in the final chapter. The CETSP, CEVRP, and SDTOP have application in aerial reconnaissance route planning. We formulate each problem as a mathematical program and apply heuristic and combinatorial optimization techniques to solve them. We present the results of extensive computational experiments that show that our methods produce high-quality solutions quickly.Item Effects of Performance Schedules on Event Ticket Sales(2009) Tseng, Peggy Hui-Hsing; Moe, Wendy W.; Business and Management: Marketing; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Event scheduling is one of many important decisions facing event marketers in the entertainment industry (i.e., how should multiple performances be scheduled across markets, across venues, and over time?). While there is ample research examining the issues of costs and constraints associated with such a decision, virtually no research exists to examine the impact of these decisions on consumer demand. Hence, the objective of this dissertation is to examine how consumers respond to event marketers' scheduling decisions. First, a scheduling effect may arise from performances within a market. When performances are scheduled closely in distance or time, their similarity in venue locations or performance dates may result in a stronger relationship and influence ticket sales. This relationship may have a positive effect on ticket sales because the similarity could signal the quality of an event and suggest the desirability of these performances. Thus, these performances attract more consumers and sell more tickets. However, the relationship could be negative. When performances are close in distance or time, they become direct substitutes and compete for consumer patronage. Another effect arises from an event distribution across markets. When an event travels from one market to another and each market has a different performance schedule, the word of mouth of this event may accumulate and carry over to later markets. If so, market sales may be a good proxy of word of mouth. How well (or poorly) an event sells in preceding markets may affect ticket sales in following markets. This dissertation consists of three essays to examine the abovementioned scheduling effects. We contact a national ticket seller to acquire a dataset containing ticket sales of a family event traveling across 42 markets. The first essay analyzes a performance schedule in one metropolitan market and investigates the scheduling effect on ticket sales. The second essay employs all performance schedules in 42 markets to study heterogeneous market responses and propose explanatory factors. Finally, the third essay incorporates the distribution sequence of this event and examines whether ticket sales in preceding markets have a carryover effect to influence ticket sales in later markets.Item How Firm Resources and Behavior Impact Firm Performance: An examination of firm resources, competitive actions, and performance(2009) Major, David Lanier; Smith, Kenneth G; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this dissertation, I considered how firm resources, actions and performance may be interrelated. I tested the notion that resources both enable and interact with firm actions to impact performance. Drawing from resource-based and actions-based theory and empirical research, testable hypotheses were developed suggesting that a firm's resources may impact performance potentially in three ways - directly, mediated by actions, and in combination with actions. I examined 1) the extent to which firm resources and actions each directly predict variation in firm performance; 2) the extent to which firm resources predict variation in intervening actions and thereby predict variation in performance; and 3) the extent to which the product of resources and actions in combination predict variation in performance. With a combined dataset of 4,337 actions, gathered through the structured-content analysis of over 16,000 published news articles, and 980 model-years of resources and performance data collected from industry and government sources, 44 foreign and domestic automakers were analyzed over a study period from 1993 to 2000. I find empirical support for key components of their relationships. The analysis shows evidence that firm resources impact performance, both through and with firm actions.Item Do Investor Capabilities Influence the Interpretation of Entrepreneur Signals? Theory and Testing in the Private Equity Setting(2009) Gera, Azi; Kirsch, David A; Goldfarb, Brent; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Informing outsiders of the potential and quality of the organization in a way that will benefit the organization and avoid putting it at risk is a challenging task in competitive settings. Under conditions of uncertainty, in which external entities are imperfectly informed about the organization, outsiders will seek for alternative signals of quality. Current research of interfirm signaling has focused on the sender's ability to generate signals. In this dissertation, I propose that receivers of signals are heterogeneous in their ability to interpret signals and that this heterogeneity significantly influences the outcome of the interaction between signaler and interpreter. I apply this insight in an entrepreneurial setting to explain differences in signaling to venture capitalist and informal private equity investors (business angels) over the early stages of a firm's lifecycle. The findings have strong implications for entrepreneurial firms' strategy and, generally, to signaling theory. I argue that signals are multifaceted. Outsiders may base their decisions on two aspects of signal: the informative aspect, which relays direct information on the capabilities of the organization; and, the legitimizing aspect, which conveys legitimacy through actions of third-party entities. The use of each aspect is determined by the abilities of the sender to generate the signal and the receiver to interpret it. I posit that the informative aspect of the signal will be prominent when both the sender's and the receiver's abilities are high. When either the sender's ability to generate a signal, or the receiver's ability to interpret it, is limited, the legitimizing aspect of the signal will be prominent. When both the sender and the receiver possess low signaling abilities, the interpretation will be based on idiosyncratic data. This dissertation explores the differences between these two facets of signals, the relationships between the signal aspects at different stages of the organizational life cycle, and the usefulness of each signal aspect when considering the organization's target audience. The first essay explains the purpose of the two signal aspects for stakeholders and the interactive nature of the signals' facets. The two following essays test the theory by utilizing two large datasets of private equity investment solicitations. The second essay evaluates the effectiveness of the legitimizing aspect of the signal as a mechanism for screening startups' funding solicitations. The third essay compares the informative and legitimizing aspects of signals as decision making mechanisms for both angel and venture capital investors.Item ROBUST REVENUE MANAGEMENT WITH LIMITED INFORMATION : THEORY AND EXPERIMENTS(2009) Lan, Yingjie; Ball, Michael O; Karaesmen, Itir A; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Revenue management (RM) problems with full probabilistic information are well studied. However, as RM practice spreads to new businesses and industries, there are more and more applications where no or only limited information is available. In that respect, it is highly desirable to develop models and methods that rely on less information, and make fewer assumptions about the underlying uncertainty. On the other hand, a decision maker may not only lack data and accurate forecasting in a new application, but he may have objectives (e.g. guarantees on worst-case profits) other than maximizing the average performance of a system. This dissertation focuses on the multi-fare single resource (leg) RM problem with limited information. We only use lower and upper bounds (i.e. a parameter range), instead of any particular probability distribution or random process to characterize an uncertain parameter. We build models that guarantee a certain performance level under all possible realizations within the given bounds. Our methods are based on the regret criterion, where a decision maker compares his performance to a perfect hindsight (offline) performance. We use competitive analysis of online algorithms to derive optimal static booking control policies that either (i) maximize the competitive ratio (equivalent to minimizing the maximum regret) or (ii) minimize the maximum absolute regret. Under either criterion, we obtain closed-form solutions and investigate the properties of optimal policies. We first investigate the basic multi-fare model for booking control, assuming advance reservations are not cancelled and do not become no-shows. The uncertainty in this problem is in the demand for each fare class. We use information on lower and upper bounds of demand for each fare class. We determine optimal static booking policies whose booking limits remain constant throughout the whole booking horizon. We also show how dynamic policies, by adjusting the booking limits at any time based on the bookings already on hand, can be obtained. Then, we integrate overbooking decisions to the basic model. We consider two different models for overbooking. The first one uses limited information on no-shows; again the information being the lower and upper bound on the no-show rate. This is appropriate for situations where there is not enough historical data, e.g. in a new business. The second model differs from the first by assuming the no-show process can be fully characterized with a probabilistic model. If a decision-maker has uncensored historical data, which is often the case in reality, he/she can accurately estimate the probability distribution of no-shows. The overbooking and booking control decisions are made simultaneously in both extended models. We derive static overbooking and booking limits policies in either case. Extensive computational experiments show that the proposed methods that use limited information are very effective and provide consistent and robust results. We also show that the policies produced by our models can be used in combination with traditional ones to enhance the system performance.Item Industrial Flexibility in Theory and Practice(2009) Reindorp, Matthew; Fu, Michael; Goyal, Manu; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)At the heart of any decision problem is some degree of "flexibility" in how to act. Most often, we aim to extract greatest possible value from this inherent flexibility. The three essays compiled here are aligned with this same general aim, but we have an important secondary concern: to highlight the value of flexibility itself in the various situations we study. In the first essay, we consider the timing of an action: when to replace obsolete subsystems within an extensive, complex infrastructure. Such replacement action, known as capital renewal, must balance uncertainty about future profitability against uncertainty about future renewal costs. Treating renewal investments as real options, we derive the unique, closed-form optimal solution to the infinite horizon version of this problem and determine the total present value of an institution's capital renewal options. We investigate the sensitivity of the solution to variations in key problem parameters. The second essay addresses the promising of lead times in a make-to-order environment, complicated by the need to serve multiple customer classes with differing priority levels. We tackle this problem with a "model free" approach: after preparing a discrete-event simulation of a make-to-order production system, we determine a policy for lead time promising through application of a reinforcement learning algorithm. The third essay presents an empirical analysis of new product launches in the automotive industry, showing that manufacturing flexibility is one key indicator of superior productivity during launch. We explore the financial dimensions of the apparent productivity differences and show that the use of flexible manufacturing increases an automobile plant's likelihood of being chosen to host a new product launch.Item The Impact of Globalization on Inventory and Financial Performance: A Firm-Level and Industry-Level Analysis(2009) Han, Chaodong; Dresner, Martin E; Dong, Yan; Business and Management: Logistics, Business & Public Policy; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation investigates how globalization affects inventory and financial performance from both firm and industry perspectives. Drawing upon elements from classic inventory models, transaction costs, geographic economics, and international business and strategy literatures, this dissertation aims to contribute to the construction of a theory of global supply chain management through an empirical testing of hypotheses on the effects of global sourcing, exports and manufacturing offshoring (i.e., foreign subsidiaries) on inventory performance and financial performance, using data from multinational firms and U.S. manufacturing industries. Motivated by the lack of empirical research on inventory management in a global context, and an uncertain relationship between globalization and financial performance reported in the international business and strategy literature, the first essay examines how globalization affects firm financial performance directly and indirectly through inventory management. Globalization is further examined by a two-dimensional measure: global intensity and extensity. Due to increased uncertainties associated with global supply chains, globalization may significantly increase firm inventory levels. Even though manufacturing offshoring may benefit multinational firms through economies of scale and geographic diversification, escalating transaction costs and shrinking arbitrage opportunities may overwhelm benefits and lead to reduced financial performance. This direct-indirect effect model is tested using a large panel dataset of thousands of multinational firms over 1987-2007, collected from the COMPUSTAT global and segment databases. Essay 1 contributes to the supply chain management literature by providing a two-dimensional measure of globalization: foreign market penetration (depth) and geographic expansion (breadth), and may enhance our understanding of global supply chains. The second essay analyzes the impact of global inbound and outbound supply chains on inventory performance within the U.S. economy. This research argues that global activity (i.e., global sourcing and exports) has offsetting effects on domestic inventory levels: an increasing impact due to risk considerations and a decreasing impact due to cost pressure from rising inventory costs. According to location theory, rooted in geographic economics, and "new trade theory" on intra-firm trade, firms may be able to efficiently allocate inventories to low cost regions along their global supply chains. To the extent that allocative efficiency may only be realized once a certain level of global activity is reached, it is hypothesized that the impact of international trade on domestic inventory is inverted-U shaped. i.e., as globalization increases, inventory levels first increase due to the longer and more complex supply chains, then decrease as firms determine how to more efficiently allocate their inventory across borders. The hypotheses are tested using inventories at all three stages (raw materials, finished goods and work-in-process inventory) and industry operating data from U.S. manufacturers over the period 1997-2005. Regression results indicate a strong invert-U shaped relationships existing between import intensity (measured by imported raw materials as a percentage of industry total cost of materials) and raw materials inventory in days of supply, and between export intensity (measured by exported finished goods as a percentage of total value of industry shipments) and finished goods inventory in days of supply. Essay 2 makes two contributions: theoretically, it is the first effort to connect international trade with inventory performance; empirically, results based on all U.S. manufacturers over a recent nine-year period may provide a benchmark for management when designing global inventory strategy. In summary, this dissertation comprehensively investigates the impact of global supply chains on inventory performance and financial performance in the context of multinational firms and U.S. domestic manufacturers and hence is expected to enhance our understanding of global supply chain management theory and practices.Item THE INFLUENCE OF CONSUMER MOTIVATIONS ON CONSUMPTION INTENTIONS AND BEHAVIOR(2009) Espinoza, Francine; Hamilton, Rebecca W; Srivastava, Joydeep; Business and Management: Marketing; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This Dissertation comprises two essays that investigate how consumers' different motivations affect their cognitive responses and consumption behavior. Essay 1 shows that consumers' motivation to rely on their own opinion and correct their judgments for the influence of a product recommendation moderates source credibility effects on judgment certainty and behavioral intentions. Building upon earlier research showing that correction may decrease judgment certainty, we propose that, contrary to this unidirectional effect, correction has an asymmetric effect on judgment certainty and behavioral intentions, depending on the initial recommendation credibility. In a series of three studies, we provide support for the asymmetric effect of correction and show that when consumers correct for the influence of a high credibility recommendation, their judgment certainty and behavioral intentions decrease, but when they correct for the influence of a low credibility recommendation, their judgment certainty and behavioral intentions increase. Essay 2 examines the influence of consumers' motivations on product valuation and proposes that while buyers are intrinsically motivated to minimize what they are giving up, sellers are intrinsically motivated to maximize what they are getting. These differential goals lead to a discrepancy in product valuation of buyers relative to sellers. In a series of five studies, we provide support for the motivated valuation explanation for the disparity between buying and selling prices and show that when the goal pursuit of buyers and sellers is altered, buyers may be willing to buy for a higher price and sellers may be willing to buy for a lower price.Item Simulating and Optimizing: Military Manpower Modeling and Mountain Range Options(2009) Hall, Andrew Oscar; Fu, Michael C; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this dissertation we employ two different optimization methodologies, dynamic programming and linear programming, and stochastic simulation. The first two essays are drawn from military manpower modeling and the last is an application in finance. First, we investigate two different models to explore the military manpower system. The first model describes the optimal retirement behavior for an Army officer from any point in their career. We address the optimal retirement policies for Army officers, incorporating the current retirement system, pay tables, and Army promotion opportunities. We find that the optimal policy for taste-neutral Lieutenant Colonels is to retire at 20 years. We demonstrate the value and importance of promotion signals regarding the promotion distribution to Colonel. Signaling an increased promotion opportunity from 50% to 75% for the most competitive officers switches their optimal policy at twenty years to continuing to serve and competing for promotion to Colonel. The second essay explores the attainability and sustainability of Army force profiles. We propose a new network structure that incorporates both rank and years in grade to combine cohort, rank, and specialty modeling without falling into the common pitfalls of small cell size and uncontrollable end effects. This is the first implementation of specialty modeling in a manpower model for U.S. Army officers. Previous specialty models of the U.S. Army manpower system have isolated accession planning for Second Lieutenants and the Career Field Designation process for Majors, but this is the first integration of rank and specialty modeling over the entire officer's career and development of an optimal force profile. The last application is drawn from financial engineering and explores several exotic derivatives that are collectively known Mountain Range options, employing Monte Carlo simulation to price these options and developing gradient estimates to study the sensitivities to underlying parameters, known as "the Greeks". We find that IPA and LR/SF methods are efficient methods of gradient estimation for Mountain Range products at a considerably reduced computation cost compared with the commonly used finite difference methods.Item Unmapped Holdings and the Performance Measurement of U.S. Equity Mutual Funds(2009) Hunter, David L.; Wermers, Russell; Business and Management: Finance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This paper investigates a dataset that provides information about assets held by U.S. equity mutual funds, but are not U.S. equities (`unmapped holdings'). I show the widespread presence of these assets and investigate how they are used within mutual fund portfolios. I find that their effects are statistically significant upon both portfolio risk and return. They can either hedge or complement mapped asset returns. I show that predictability of mutual fund returns are reduced when unmapped holdings returns are controlled. Since unmapped holdings returns are not observable, I define an econometric technique that in chapter two that can control for their effect. This technique uses an average return (an `endogenous benchmark') to control for common but immeasurable or unobservable characteristics in a group of funds. I find that an `endogenous benchmark' alone produces estimates nearly as good as those using common risk factor regression models. By combining an endoge- nous bechmark with other risk factors in regression models, I find that estimates are improved.