Reducing Risk or Increasing Profit? Provider Decisions in Agreement Networks

Michalk, Wibke; Filipova-Neumann, Lilia; Weinhardt, Christof

doi:10.1287/serv.3.3.206

Cited by 8 publications

(5 citation statements)

References 18 publications

(11 reference statements)

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“…They compare cases in which the retailer either does or does not provide a service guarantee and explore the effect of risk aversion on service commitment strategies. Following previous studies (Holmström and Milgrom 1991, Hauser et al 1994, Xiao and Qi 2010, Michalk et al 2011), Xiao et al (2012 consider the consumer's certainty equivalent under no service guarantee and service guarantee. They find that the consumer's degree of risk aversion is the most important factor for determining the service commitment strategy, and that the degrees of risk aversion experienced by both the supplier and the retailer influence the service commitment strategy only when consumers are A C C E P T E D M A N U S C R I P T 21 risk averse.…”

Section: Accepted Manuscriptmentioning

confidence: 99%

Service supply chain management: A review of operational models

Wang

Wallace

Shen

et al. 2015

European Journal of Operational Research

277

177

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Section: Accepted Manuscriptmentioning

confidence: 99%

Service supply chain management: A review of operational models

Wang

Wallace

Shen

et al. 2015

European Journal of Operational Research

277

177

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“…Because the risk-profit trade-off (Markowitz 1959) is an important and commonly adopted objective in service science (Michalk et al 2011, Xiao et al 2012) and operations management Chiu 2012, Liu et al 2012), we define the following mean-variance objective to capture the decision-making problem for the risk-averse MC service provider:…”

Section: The Basic Modelmentioning

confidence: 99%

Optimal Return Service Charging Policy for a Fashion Mass Customization Program

Choi

2013

Service Science

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M ass customization (MC) service is a pertinent industrial practice in the fashion industry. To foster trust and enhance demand, some brands now allow dissatisfied customers to return the MC fashion product for a full refund minus a service charge. The service charge is a measure to avoid the abuse of the return right and to subsidize the operations cost (e.g., shipping) and loss from the return. Motivated by this observed industrial practice, this paper analytically examines the optimal return service charge policy. We separate the study into two cases-those of risk-neutral and those of risk-averse MC companies, respectively. For each case, we derive the closed-form expression of the optimal return service charge, and we conduct analytical sensitivity analysis to illustrate how different important parameters in the model affect the optimal return service charge. In addition, by comparing the two cases, we reveal how the MC service provider's level of risk aversion affects the optimal return service charge policy. Finally, we derive the conditions under which it is optimal to offer a zero return service charge (i.e., free return with a full refund). These conditions provide insight on the real-world practice in which some fashion companies offer free return service to their registered members but not to every customer.

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“…In this paper we use the superscript i = NSG, SG to differentiate the NSG and SG settings. Holmström and Milgrom (1991), Hauser et al (1994), Xiao and Qi (2010), and Michalk et al (2011), we express the consumer's certainty equivalent (CE) as follows:…”

Section: Consumer Behavior Under Nsgmentioning

confidence: 99%

Service Commitment Strategy and Pricing Decisions in Retail Supply Chains with Risk-Averse Players

et al. 2012

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W e study the service commitment strategy and pricing decisions in a single-supplier single-retailer supply chain where all the players (and consumers) are risk averse. Motivated by various industrial practices, we explore the case where the retailer determines whether to provide a service guarantee (SG) or to provide no service guarantee (NSG). The main incentive for using SG is to reduce the service-level risk to consumers. We derive the range of the supplier's degree of risk aversion and the range of the consumer's sensitivity (or attitude) to service reliability over which the retailer chooses SG. We find that (i) the retailer's motivation to use SG increases with the consumer's product quality perception, (ii) the retailer's motivation to use SG decreases with the retailer's degree of risk aversion but increases with both the consumer's degree of risk aversion and the retailer's service investment efficiency, and (iii) the unit wholesale price under NSG is lower than that under SG if and only if the consumer's service-level sensitivity is sufficiently small. In addition, we illustrate that the endogenization of unit wholesale price raises the retailer's motivation to use SG if the consumer is sufficiently risk averse; otherwise, it may decrease this motivation. In the make-to-stock mode, we also find that a higher unit-holding cost weakens the retailer's motivation to use an availability guarantee.

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Reducing Risk or Increasing Profit? Provider Decisions in Agreement Networks

Cited by 8 publications

References 18 publications

Service supply chain management: A review of operational models

Service supply chain management: A review of operational models

Optimal Return Service Charging Policy for a Fashion Mass Customization Program

Service Commitment Strategy and Pricing Decisions in Retail Supply Chains with Risk-Averse Players

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