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UBC Theses and Dissertations

Essays in operations management Liao, Sha


This dissertation addresses two topics in the domain of operations management. First we study a single utility’s optimal policies under the Renewable Portfolio Standard, which requires it to supply a certain percentage of its energy from renewable resources. The utility demonstrates its compliance by holding a sufficient amount of Renewable Energy Certificates (RECs) at the end of each year. The utility’s problem is formulated as a stochastic dynamic program. The problem of determining the optimal purchasing policies under stochastic demand is examined when two energy options, renewable or regular, are available, with different prices. Meanwhile, the utility can buy or sell RECs in any period before the end of the horizon in an outside REC market. Both the electricity prices and REC prices are stochastic. We find that the optimal trading policy in the REC market is a target interval policy. Sufficient conditions are obtained to show when it is optimal to purchase only one kind of renewable energy and regular energy, and others to show when it is optimal to purchase both of them. Explicit formulas are derived for the optimal purchasing quantities in each case. In the second essay, we examine the interaction between a buyer (Original Equipment Manufacturer, OEM) and his supplier during new product development. A “white box” relationship is assumed: the OEM designs the specification of the product and outsources the production to his supplier. The supplier may suggest potential specification problems. Our research is motivated by the fact that the supplier may detect potential specification problems, and one cannot take for granted that the supplier would inform the OEM. We solve an optimization problem from the perspective of the OEM. We first prove that it is strictly better for the OEM to design the contract so that the supplier will inform the OEM should she detect any flaws. Then we characterize the optimal solutions for the OEM. We also perform some sensitivity analysis at the end.

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