UBC Theses and Dissertations

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UBC Theses and Dissertations

Three essays in operations management Sheng, Lifei


This thesis comprises three independent essays in operations management. The first essay explores a specific issue encountered by mobile gaming companies. The remaining two essays address the contracting problem in a supply chain setting. In the first essay, we study the phenomena of game companies offering to pay users in "virtual" benefits to take actions in-game that earn the game company revenue from third parties. Examples of such "incentivized actions" include paying users in "gold coins" to watch video advertising and speeding in-game progression in exchange for filling out a survey etc. We develop a dynamic optimization model that looks at the costs and benefits of offering incentivized actions to users as they progress in their engagement with the game. We find sufficient conditions for the optimality of a threshold strategy of offering incentivized actions to low-engagement users and then removing incentivized action to encourage real-money purchases once a player is sufficiently engaged. Our model also provides insights into what types of games can most benefit from offering incentivized actions. In the second essay, we propose what we call a generalized price-only contract, which is a dynamic generalization of the simple wholesale price-only contract. We derive some interesting properties of this contract and relate them to well-known issues such as double marginalization, relative power in a supply chain due to Stackelberg leadership, contract structure and commitment issues. In the third essay, we consider a supplier selling to a retailer with private inventory information over multiple periods. We focus on dynamic short-term contracts, where contracting takes place in every period. At the beginning of each period, with inventory or backlog kept privately by the retailer, the supplier offers a one-period contract and the retailer decides his order quantity in anticipation of uncertain customer demand. We cast the problem as a dynamic adverse-selection problem with Markovian dynamics. We show that the optimal short-term contract has a threshold structure, with possibly multiple thresholds. In certain cost regimes, the optimal contract entails a base-stock policy yet induces partial participation.

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