Essays in Empirical Operations Management: Bayesian Learning of Service Quality and Structural Estimation of Complementary Product Pricing and Inventory Management

This dissertation contributes to the rapidly growing empirical research area in the field of operations management. It contains two essays, tackling two different sets of operations management questions which are motivated by and built on field data sets from two very different industries --- air cargo logistics and retailing.

The first essay, based on the data set obtained from a world leading third-party logistics company, develops a novel and general Bayesian hierarchical learning framework for estimating customers' spillover learning, that is, customers' learning about the quality of a service (or product) from their previous experiences with similar yet not identical services. We then apply our model to the data set to study how customers' experiences from shipping on a particular route affect their future decisions about shipping not only on that route, but also on other routes serviced by the same logistics company. We find that customers indeed borrow experiences from similar but different services to update their quality beliefs that determine future purchase decisions. Also, service quality beliefs have a significant impact on their future purchasing decisions. Moreover, customers are risk averse; they are averse to not only experience variability but also belief uncertainty (i.e., customer's uncertainty about their beliefs). Finally, belief uncertainty affects customers' utilities more compared to experience variability.

The second essay is based on a data set obtained from a large Chinese supermarket chain, which contains sales as well as both wholesale and retail prices of un-packaged perishable vegetables. Recognizing the special characteristics of this particularly product category, we develop a structural estimation model in a discrete-continuous choice model framework. Building on this framework, we then study an optimization model for joint pricing and inventory management strategies of multiple products, which aims at improving the company's profit from direct sales and at the same time reducing food waste and thus improving social welfare.

Collectively, the studies in this dissertation provide useful modeling ideas, decision tools, insights, and guidance for firms to utilize vast sales and operations data to devise more effective business strategies.

Establishing a regional, multisite database for quality improvement and service planning in community-based palliative care and hospice.

BACKGROUND: Outpatient palliative care, an evolving delivery model, seeks to improve continuity of care across settings and to increase access to services in hospice and palliative medicine (HPM). It can provide a critical bridge between inpatient palliative care and hospice, filling the gap in community-based supportive care for patients with advanced life-limiting illness. Low capacities for data collection and quantitative research in HPM have impeded assessment of the impact of outpatient palliative care. APPROACH: In North Carolina, a regional database for community-based palliative care has been created through a unique partnership between a HPM organization and academic medical center. This database flexibly uses information technology to collect patient data, entered at the point of care (e.g., home, inpatient hospice, assisted living facility, nursing home). HPM physicians and nurse practitioners collect data; data are transferred to an academic site that assists with analyses and data management. Reports to community-based sites, based on data they provide, create a better understanding of local care quality. CURRENT STATUS: The data system was developed and implemented over a 2-year period, starting with one community-based HPM site and expanding to four. Data collection methods were collaboratively created and refined. The database continues to grow. Analyses presented herein examine data from one site and encompass 2572 visits from 970 new patients, characterizing the population, symptom profiles, and change in symptoms after intervention. CONCLUSION: A collaborative regional approach to HPM data can support evaluation and improvement of palliative care quality at the local, aggregated, and statewide levels.

Valuing drinking water provision as an ecosystem service in the neuse river basin

The valuation of ecosystem services such as drinking water provision is of growing national and international interest. The cost of drinking water provision is directly linked to the quality of its raw water input, which is itself affected by upstream land use patterns. This analysis employs the benefit transfer method to quantify the economic benefits of water quality improvements for drinking water production in the Neuse River Basin in North Carolina. Two benefit transfer approaches, value transfer and function transfer, are implemented by combining the results of four previously published studies with data collected from eight Neuse Basin water treatment plants. The mean net present value of the cost reduction estimates for the entire Neuse Basin ranged from $2.7 million to $16.6 million for a 30% improvement in water quality over a 30-year period. The value-transfer approach tended to produce larger expected benefits than the function-transfer approach, but both approaches produced similar results despite the differences in their methodologies, time frames, study sites, and assumptions. © 2010 ASCE.

Asset pricing in created markets

We investigate the applicability of the present-value asset pricing model to fishing quota markets by applying instrumental variable panel data estimation techniques to 15 years of market transactions from New Zealand's individual transferable quota (ITQ) market. In addition to the influence of current fishing rents, we explore the effect of market interest rates, risk, and expected changes in future rents on quota asset prices. The results indicate that quota asset prices are positively related to declines in interest rates, lower levels of risk, expected increases in future fish prices, and expected cost reductions from rationalization under the quota system. © 2007 American Agricultural Economics Association.