Production and Financing Strategies of a Distribution Channel under Random Yield and Random Demand

This study considers a distribution channel consisting of a manufacturer with capital constraint and uncertain yield and a retailer that faces random demand. To maintain production, the manufacturer can either (1) avail bank credit financing from a perfectly competitive market or (2) request advance payment from the retailer. First, we establish two Stackelberg game models under bank credit financing (BCF) and advance payment mechanism (APM). By comparing the equilibrium strategies of the two financing models and the optimal profits of channel members, we conclude that APM is more advantageous than BCF in terms of improving channel performance. Second, we design a revenue sharing (RS) contract based on APM to achieve channel coordination. Finally, numerical analysis is presented to verify the conclusions obtained in this study.

Role of Risk Aversion in Price Postponement Under Supply Random Yield

Price postponement is an effective mechanism to hedge against the adverse effect of supply random yield. However, its effectiveness and the resulting production decisions have not been studied for risk-averse firms. In this paper, we investigate the impact of price postponement and risk aversion under supply yield risk. Specifically, we study a risk-averse monopoly firm’s production and pricing decisions under supply random yield with two distinct pricing schemes: (1) ex ante pricing in which the firm simultaneously makes the sales price and sourcing decisions before production takes place and (2) responsive pricing in which the pricing decision is postponed until after the production yield realization. We adopt conditional value at risk (CVaR) as the risk-aversion measurement and investigate the impact of the firm’s risk-aversion level on its optimal decisions and the corresponding profit. Among other results, we show that, for each pricing scheme, there exists a unique risk-aversion threshold under which the firm chooses not to produce. Interestingly, price postponement has no impact on the risk-aversion threshold as the cutoff values under both pricing schemes are the same. We further show that the value of CVaR improvement from responsive pricing may not be monotonic in the firm’s risk-aversion level. Consequently, our results indicate that, although price postponement induces operational flexibility by better matching demand with available supply, whether the firm should adopt responsive pricing needs to be carefully evaluated as the benefit may not justify the potential fixed cost associated with price postponement, especially for a highly risk-averse firm. In addition, we show that responsive pricing, even with its ex post revenue-maximization behavior, benefits the end-market consumers in equilibrium. Finally, we conduct extensive numerical studies to check and confirm the robustness of our results. This paper was accepted by Charles Corbett, operations management.

The Loss-Averse Newsvendor Problem with Random Yield and Reference Dependence

This paper studies a loss-averse newsvendor problem with reference dependence, where both demand and yield rate are stochastic. We obtain the loss-averse newsvendor’s optimal ordering policy and analyze the effects of loss aversion, reference dependence, random demand and yield on it. It is shown that the loss-averse newsvendor’s optimal order quantity and expected utility decreases in loss aversion level and reference point. Then, that this order quantity may be larger than the risk-neutral one’s if the reference point is less than a negative threshold. In addition, although the effect of random yield leads to an increase in the order quantity, the loss-averse newsvendor may order more than, equal to or less than the classical one, which significantly depends on loss aversion level and reference point. Numerical experiments were conducted to demonstrate our theoretical results.

AN OVERVIEW OF THE OPTIONS WITHIN AN ISLAMIC CONTEXT

The investors search the financial instruments which contain least cost and reduced risk. As a recap, the financial instrument is negotiable contracts and they are two sorts, at the: • First, the traditional assets financials with that are negotiated in market of the stock exchange (shares, bonds, and the part in organism for collective investment in securities value …) or other cash instruments such as loans and deposits commercialize in the market; • Second, the derived financial product: there are two types of contracts, for the one a close position like (forwards, futures, swaps) and for the other one, the optional position likes options or warrants. So, all Islamic country observes that the option hasn’t legitimate in stock exchange and it has for originate most of the doctrine of Islam prohibit the transaction with all kinds of options,this implies a complete absence of options in the financial markets of Muslim countries and this context a random yield with in the money (ITM) of option equal zero.