Recent press coverage of piracy and digital goods touts the practice of subscription (as opposed to selling) as a “piracy killer.” However, the effectiveness of digital goods subscriptions remains controversial in terms of the profitability for different supply chain members, including content providers and retailers. Specifically, the dearth of existing studies concerning business model choices in distribution channel structures indicates that the literature has yet to provide a comprehensive answer to this question. Therefore, we develop an analytical model to investigate the optimal business model choices for digital goods firms in the presence of digital piracy in a centralized supply chain (CSC) or a decentralized supply chain (DSC), explicitly considering heterogeneous consumer usage rates (both heavy and light). Unique to the current literature, we find that illegal copies serve as a substitute for a different set of consumers, depending on the business model used by the firms. In particular, there are circumstances under which the firms optimally allow heavy-usage consumers to adopt illegal copies in the subscription model. In contrast, illegal copies can also serve as a substitute for the light-usage consumers in the selling-ownership model. Unlike current literature, we identify situations in a CSC whereby the selling-ownership model (a) is more profitable and (b) has fewer illegal goods adopted than the subscription model when piracy is present in the market. When analyzing a DSC, we find that the existence of piracy can actually aid in the coordination of the supply chain because digital piracy serves as a shadow competitor that effectively mitigates the double marginalization between the two supply chain partners. More specifically, there are situations where both players prefer the subscription model, and there are other situations where they both prefer the selling-ownership model. This study bridges the literature gap between business models for digital goods and the impact of digital piracy. Our findings provide a possible explanation for the coexistence of various business models within digital goods markets, particularly when piracy is prevalent. Furthermore, we introduce actionable plans for practitioners such as providing incentives to retailers that may be apathetic to eradicating piracy and enhancing supplementary subscription-based services for better coordination.

This paper focuses on the critical roles of knowledge workers when a firm pursues a major innovation project. In this context, we consider knowledge workers as those who contribute to a firm's performance at the executive, management, and technical specialist levels. Technical specialists include persons with advanced skills in engineering, analytics, statistics, science, and economics. By analyzing a series of case studies and personal interviews, we demonstrate that alignment (i.e., coordination, integration, and collaboration) among these knowledge workers is critical for the success of an innovation project. The paper concludes with a discussion of the responsibilities of knowledge workers at the executive, management, and technical specialist levels to ensure the necessary alignment occurs for successful innovation.

According to the American Society for the Prevention of Cruelty to Animals (ASPCA), approximately 23% of the animals that enter shelters each year are euthanized. Many animal shelters strive to reduce euthanization and the stray animal population through capacity expansion, adoption increasing programs, and mergers. In this paper, we define, compare and perform sensitivity analysis of performance metrics for animal shelter involving loss queues. We ultimately provide recommendations for animal shelters on the most efficient investments, and analyze the effects of mergers and capacity expansion on various performance metrics. We represent animal shelters by utilizing loss queues with and without reneging and perform sensitivity analysis by calculating the asymptotic expansion of the performance metrics for various cases. We find that the euthanization in traditional shelters is not monotonically decreasing with increases in the demand for animals. A counterintuitive result shows that increasing the capacity in a traditional shelter (or merging two traditional shelters together) does not necessarily decrease the number of animals euthanized. Our results related to the performance metrics Erlang loss queues can be utilized for any type of queuing system with involuntary departures. (C) 2020 Elsevier B.V. All rights reserved.

In this paper, we study the green technology and end-of-pipe abatement decisions of a multi-facility firm along with its facility size decisions. We utilize a model that captures three different environmental regulations: (1) emissions tax, (2) emissions permit-trading, and (3) command-and-control. Our results show that if the variable emissions tax, permit price or emissions penalty is nonzero, the firm should always invest in green technology emissions reductions. In general, we observe an all-or-nothing trend regarding end-of-pipe abatement investment. In particular, the firm invests in best available end-of-pipe abatement technology (BACT-EOP) when the variable emissions tax, permit price or emission penalty is greater than the per unit cost of end-of-pipe abatement. Moreover, we show that investments in end-of-pipe abatement can enhance investments in green technology, but that investments in end-of-pipe abatement should be pursued secondarily. Furthermore, we find that while the facility size, and consequently the local and global transportation emissions, are not impacted by an emissions tax regulation, facility size is impacted by an emissions permit trading or command-and-control emissions regulation. With regards to emissions, frequently there is a direct trade-off between local vs. global transportation and production emissions. To illustrate, we show that regulations that yield the lowest local production emissions, i.e. emissions from a single facility, do not always yield the lowest global production, and local and global transportation emissions. In fact, the conditions that yield the lowest local transportation emissions yield the largest global transportation emissions, and vice versa. (C) 2019 Elsevier B.V. All rights reserved.

Recent press on piracy and digital goods touts the policy of leasing (as opposed to selling) as a “piracy killer.” However, the effectiveness of leasing is still controversial for digital goods in terms of the profitability for alternate supply chain members, including content providers (i.e., studios or publishers) and retailers. We develop an analytic model where market players either lease or sell digital goods in a market with both pirated and legitimate copies available. We compare the profitability of these alternate business models in a dynamic two-period setting and investigate how a firm optimally utilizes pricing to cope with piracy in a centralized supply chain (CSC) or a decentralized supply chain (DSC). Our results offer insights concerning the impact on firms utilizing alternate business models (i.e., selling or leasing) on different supply chain forms. We discover that leasing is associated with higher profits than selling in a CSC. In contrast, selling provides higher supply chain profit in a DSC, mainly due to the intertemporal competition. Surprisingly, we identify circumstances under which a DSC can have a more substantial supply chain profit than a CSC in a selling model. We also prove that the demand for pirated copies is lower for a CSC that utilizes a leasing model (as compared to a selling model). However, the demand for pirated copies is actually higher for a DSC that utilizes a leasing model (as compared to a selling model). Therefore, we confirm that leasing is not always an effective “piracy killer.”

Probabilistic selling can improve a seller’s profit by recognizing consumers’ salient thinking behavior.

This paper studies probabilistic selling for vertically differentiated products, whereby consumers do not know the exact identity of a product until after making the purchase. An important feature of probabilistic selling overlooked by previous literature is that it changes the product line which often determines consumers’ choice context. Our work discovers the crucial role of context effects taking into account consumers’ salient thinking behavior: consumers focus their limited attention on and hence overweight the salient attribute of a product in their perception, leading to context-dependent preferences. We show that probabilistic selling can improve the seller’s profit with salient thinkers even when this strategy does not emerge with rational consumers. With salient thinking, the probabilistic product enables the seller to transform the consumers’ choice context favorably and direct their attention to quality. Our findings demonstrate the importance of exploiting consumers’ salient thinking behavior and suggest that probabilistic selling, as a context management tool, can be more beneficial than previously shown.

Supply chains have benefitted tremendously from digital and transportation technologies over the years. Advanced IT systems have enhanced inventory and demand visibility, allowed for easy information exchange with customers, and facilitated communications with global partners. Transportation technologies have improved the speed and efficiency necessary to transport goods around the globe. However, dramatic changes in both of these areas are on the horizon. The emergence of new technologies such as 3D printing, virtual reality, driverless transportation, drones, near field communications, and the Internet of Things will force the next big wave of changes in global supply chains. While many of these technologies have been adopted by individual firms, many questions remain concerning how these technologies will drive new supply chain policies, business models, and regulations in the future. To illustrate, while technologies such as driverless transportation and the Internet of Things facilitate supply chain efficiency and transparency, they also increase the risk of compromising data security for all parties involved. In this article, we offer a brief overview of each of these new technologies, and summarize the impact on the supply chain. We intend for this chapter to spur interest and research into not only these technologies and their impact on the supply chain, but also into envisioning the supply chains of the future.

We investigate the effect of environmental regulations in the form of a carbon tax and command-and-control legislation on plant capacity and location decisions of a firm. In this context, command-and-control involves a limit on the total emissions and penalties for any polluter exceeding this environmental limit, while carbon tax involves a variable cost for emissions. We also propose two novel policy options that should be considered by policy makers for transportation emissions: (1) a per unit per mile transportation penalty, and (2) a collective transportation emissions policy with a limit on total transportation emissions that encourages emission and cost efficient facility networks. We devise an exact algorithm to solve the arising discontinuous nonlinear integer problem. We also consider simplified versions of the problem to gain analytical insights on factors driving the solutions for the more accurate yet complex scenarios. We develop a realistic dataset from the auto industry gleaned from publicly available sources to highlight key results of the model. Through analysis of this representative data, we identify the environmental limits and penalties that would drive the company to compliance. We find that stricter regulations without high penalties would not assure compliance as the benefits of increased scale associated with a centralized plant frequently outweigh the regulatory penalties. At the strategic level, a production emissions tax does not encourage companies to reduce production emissions. However, high lump sum penalties with intermediate limits reduce both regional production and total transportation emissions. We find that for regional production emissions, while a command and control scheme with a high lump sum emissions penalty is effective in reducing emissions, a per unit carbon tax has no effect. Interestingly the opposite is true for total transportation emissions, where we observe that the per unit per mile transportation emissions tax is more effective than a command and control scheme. Finally, we also find that companies with low production pollution, low demand or high transportation costs should consider decentralization to comply with the environmental regulations.

The introduction of digital goods in the media industry has gained a considerable amount of positive press due to superior features such as increased accessibility and portability. However, the distribution of these digital goods in conjunction with their physical analogs (i.e., printed books) has been operationally problematic for media supply chains. Specifically, the types of contracts utilized to distribute these goods such as agency models have come under fire in the press. A high profile case brought by the Department of Justice (DOJ) against Apple exemplifies this debate as the DOJ claims that the agency model utilized by Apple caused higher prices and decreased consumer surplus. We create and analyze a model of vertically differentiated goods to compare and contrast the agency model with the wholesale model. We ascertain that both (a) the revenue‐sharing structure and (b) the upstream publisher's control over the price contribute to the benefits of the agency model. We consider a variation of this model which shows that if the retailer utilizes a “fixed price” model, then he suffers from a short‐term loss in profit, possibly to garner additional market share. We also investigate an incentive alignment condition for the agency model which assures that the retailer and the publisher will together commit to selling digital goods alongside physical goods in the supply chain. Finally, we analyze an extension of the original model which incorporates horizontal differentiation in addition to vertical differentiation and shows that in most cases, the horizontal differentiation does not alter our original results that the agency model outperforms the wholesale model.

While digital goods industries such as entertainment, software, and publishing are growing at a rapid pace, traditional supply chain contract models have failed to evolve with the new digital economy. To illustrate, the agency model utilized by the e-book publishing industry has recently received much negative attention brought by the U.S. Department of Justice's lawsuit against Apple, Inc. The emerging agency model in the e-book industry works as follows: the publisher sets the price of the digital goods and the retailers who serve as agents retain a percentage of the revenue associated with a consumer purchase. The regulators claim that the agency model is hurting this industry as well as the consumer's welfare because e-book prices have increased after the introduction of the agency model. We investigate the strategic impact of the agency model by examining a digital goods supply chain with one supplier and two competing retailers. In comparison to the benchmark wholesale model, we find that the agency model can coordinate the competing retailers by dividing the coordinated profits into a prenegotiated revenue sharing proportion. Further, we also identify the Pareto improving region whereby both the supplier and the retailers prefer the agency model to the wholesale model. Our main qualitative insight regarding the agency model still holds even when we consider the presence of the printed books in the marketplace. Thus, contrary to current press presaging the negative impact of the agency model on the e-books industry, we find the agency model to be superior to the traditional wholesale contracts for publishers, retailers and consumers in this digital goods industry.

When planning for the introduction of a stream of new products into the marketplace, managers must consider both the timing and dynamic pricing decisions to determine an appropriate entry strategy into the marketplace. Literature in new product development (NPD) typically addresses optimal timing and pricing decisions independently. We develop an analytical model of coordinated product timing and pricing decisions when there are two generations of a new product under consideration. Factors driving the timing and pricing decisions include the unit sales and cost relationships for each generation as well as NPD costs for introducing the next generation of products. We derive analytic results that characterise the optimal timing and pricing strategies for a single product rollover scenario. We analyse several numerical examples to illustrate the interplay between optimal pricing and time-to-market strategies under more general settings.

Innovation is an integral part of every firm's ongoing operations. While new product and service creation is an essential task to ensure a firm's immediate success in the marketplace, process and supply chain innovations can also create a unique source of competitive advantage for the future. Encouraging innovative thinking, developing new innovations, and managing the processes by which those innovations are developed are critical aspects of today's firm. Consequently, research which aids in the creation and maintenance of innovative firms is an important topic of inquiry for research communities on innovation management, including the operations management and information systems communities. We review the literature in this important area and offer suggestions for future research on the following topics: innovation within a firm and across the supply chain, technology management, and new product and service development.

The advent of digital goods has made a significant impact on the current traditional (physical) goods markets for items such as movies, music, video games, and books. Firms that manage both a traditional and a digital goods distribution channels are facing many emerging operational challenges. One of the most pivotal challenges is the supply chain contract model for the distribution of digital goods alongside their traditional counterparts. Recently, the agency model utilized by the e-book publishing industry has been highlighted in the press as a result of the U.S. Department of Justice's lawsuit against Apple, Inc. The regulators claim that the agency model is hurting this industry as well as the consumer's welfare because e-book prices have increased after the introduction of agency model. We investigate the strategic impact of the agency model by formulating a dual channel model in comparison with the prevalent wholesale model. Contrary to current press presaging the negative impact of the agency model, we find that the equilibrium price of digital goods is lower in the agency model than in the wholesale model. Furthermore, the agency model can mitigate the double marginalization effect of the supply chain and improve the consumers' surplus.

The advent of digital goods has made a significant impact on the current traditional (physical) goods markets for items such as movies, music, video games, and books. Firms that manage both traditional and digital goods distribution channels are facing many emerging operational challenges. One of the most pivotal problems for these media related industries concerns the supply chain contract model utilized for the distribution of digital goods alongside their traditional counterparts. Recently, the agency model exploited by publishers in the e-book industry has been highlighted in the press as a result of the U.S. Department of Justice’s (DOJ) lawsuit against Apple, Inc. Chief amongst the DOJ regulators’ complaints was that e-book prices increased and consumer surplus decreased as a direct result of the agency model. We investigate the strategic impact of the agency model in comparison with the prevalent wholesale and fixed price models by formulating a dual channel model of distribution accommodating sales of both traditional and digital goods. In contrast to the current press concerning the DOJ’s lawsuit, we find that the equilibrium price of digital goods is lower in the agency model than in the conventional wholesale model. Furthermore, the agency model can increase firm’s profit as well as consumer surplus by mitigating the double marginalization effect within the digital goods supply chain. Finally, we also conceptualize the similarity and differences between the agency model and revenue sharing contracts.

Recent press has highlighted the environmental benefits associated with online shopping, such as emissions savings from individual drivers, economies of scale in package delivery, and decreased inventories. We formulate a dual channel model for a retailer who has access to both online and traditional market outlets to analyze the impact of customer environmental sensitivity on its supply. In particular, we analyze stocking decisions for each channel incorporating price dependent demand, customer preference/utility for online channels, and channel related costs. We compare and contrast results from both deterministic and stochastic models, and utilize numerical examples to illustrate the implications of industry specific factors on these decisions. Finally, we compare and contrast the findings for disparate industries, such as electronics, books and groceries. (C) 2014 Elsevier B.V. All rights reserved.

We consider managerial decision-making regarding the evolution of knowledge in a three-stage new product development project. The manager invests in knowledge development activities (such as prototyping, pilot line testing, ramp-up experiments) at each stage throughout the project. The links between development activities at different stages are captured by recognizing that, as a result of knowledge transfer, the ability of the recipient team to generate new knowledge is enhanced. Over time as the levels of knowledge increase, product features and process characteristics improve. The performance of the new product in the marketplace, which drives net revenue, reflects the levels of knowledge attained at each stage of the project at the product launch time. The objective is to maximize the net revenue earned when the product is released to the marketplace less development costs. We show that the rate of each development activity follows an entirely different dynamic strategy during the project. In the first stage, development activities follow a front-loading strategy; in the second stage, development activities follow a moderate delay strategy, and in the third stage development activities follow an extreme delay strategy.