Impact Of Cost Uncertainty Research Articles

International Airline Alliance Network Design with Uncertainty

This paper addresses the alliance route network design problem considering uncertainty in the unit transportation cost. An alliance route network was constructed based on a hub-and-spoke (HS) network, in which airlines could achieve inter-area passenger transport through their international gateways. The design problem was formulated with a robust model containing a set of uncertain cost parameters. The model was established based on a three-subscript model of an HS network. A case study with real-world data was used to test the proposed model. The results showed that this robust solution can reduce the impact of cost uncertainty.

Impact of cost uncertainty on supply chain competition under different confidence levels

AbstractThis paper considers two competing supply chains that face cost uncertainty, each consisting of one supplier and one retailer. To address the uncertain cost information, we propose a decision rule based on confidence levels to measure the goals of the supply chain participants. We provide the new concept of the belief‐degree cost of a supply chain that embodies the decision maker's ability to comprehensively address information uncertainty and control the risk caused by information uncertainty. We find that regardless of which of the three games it is in – integrated, hybrid, or decentralized – a chain should order more and thereby gain more profit when its cost uncertainty increases or the competing chain's cost uncertainty decreases. The chain with a low or sufficiently low belief‐degree cost gains a competitive advantage on both quantity and profit. A chain's competitiveness can be enhanced by either decreasing its confidence level or increasing its rival's confidence level. Furthermore, we demonstrate that supply chain integration is the dominant strategy for given confidence levels. Nevertheless, a prisoner's dilemma occurs when the differences in the belief‐degree costs of the two supply chains are not significant and the competitive intensity is high. In addition, the magnitudes of the confidence levels can be changed to avoid or cause a prisoner's dilemma. Finally, under different confidence levels, the Stackelberg model for competing hybrid or decentralized supply chains is extended to the bargaining model, and the impact of bargaining power on supply chain competition is analyzed.

The impact of cost uncertainty on Cournot oligopoly games

In this paper, Cournot oligopoly model is examined with an uncertain quadratic cost function. A random quadratic cost function is introduced in this model. The model consists of three competed firms on which each firm in the model wants to maximize its expected profit and also wants to minimize its uncertainty by minimizing the cost. To handle this multi-objective optimization problem, the expectation and worst-case approaches are adopted used to study uncertainty. The existence and uniqueness of the equilibrium are obtained. The asymptotic behavior of the equilibrium point is also investigated. Complete stability and bifurcation analysis are provided. The obtained theoretical results are verified by numerical simulation.

Impact of cost uncertainty on pricing decisions under risk aversion

This paper studies cost uncertainty in services. Despite the fact that the service sector has become the largest component of gross domestic products in most developed economies, cost uncertainty and its impact on pricing decisions have not received much attention in the literature. In this paper, we first identify the root causes of cost uncertainty in services. Using the distinctive characteristics of services defined in the literature, we show why cost uncertainty, which has been widely neglected in the manufacturing dominated literature, is pervasive in services. Next, we investigate how cost uncertainty affects a risk-averse service provider’s pricing decisions in a make-to-order setting. Using the expected utility theory framework, we show that cost uncertainty increases the optimal price, whereas demand uncertainty reduces it. As a result of the countervailing impacts, the optimal price under risk aversion may be larger or smaller than the optimal risk-neutral price. Next, we study the problem of optimizing cost contingency in service contract pricing. We show that the optimal cost contingency decreases as the profit of the contract increases even when the utility function exhibits an increasing absolute risk aversion. Finally, we introduce various strategies to mitigate the risk of cost uncertainty observed in practice, and propose new research problems.

The impact of cost uncertainty on Cournot oligopoly game with concave demand function

In this paper, we propose a Cournot oligopoly game where quantity-setting firm uses non-linear demand function that has no inflection points. A random cost function is introduced in this model. In the model, a monopolistic firm uses an unknown demand function. The equilibrium point of the model is obtained and its dynamical characteristics such as stability, bifurcation and chaos are investigated. Complete stability and bifurcation analysis are provided. The obtained theoretical results are verified by numerical simulation.

The Impact of Cost Uncertainty on Cournot Duopoly Game with Concave Demand Function

It is reported in the literature that the most fundamental idea to address uncertainty is to begin by condensing random variables. In this paper, we propose Cournot duopoly game where quantity-setting firms use nonlinear demand function that has no inflection points. A random cost function is introduced in this model. Each firm in the model wants to maximize its expected profit and also wants to minimize its uncertainty by minimizing the cost. To handle this multiobjective optimization problem, the expectation and worst-case approaches are used. A model of two rational firms that are in competition and produce homogenous commodities is introduced using an unknown demand function. The equilibrium points of this model are obtained and their dynamical characteristics such as stability, bifurcation, and chaos are investigated. Complete stability and bifurcation analysis are provided. The obtained theoretical results are verified by numerical simulation.

The impact of cost uncertainty on the location of a distribution center

The location of a distribution center (DC) is a key consideration for the design of supply chain networks. When deciding on it, firms usually allow for transportation costs, but not supplier prices. We consider simultaneously the location of a DC and the choice of suppliers offering different, possibly random, prices for a single product. A buying firm attempts to minimize the sum of the price charged by a chosen supplier, and inbound and outbound transportation costs. No costs are incurred for switching suppliers. We first derive a closed-form optimal location for the case of a demand-populated unit line between two suppliers offering deterministic prices. We then let one of the two suppliers offer a random price. If the price follows a symmetric and unimodal distribution, the optimal location is closer to the supplier with a lower mean price. We also show the dominance of high variability: the buyer can decrease the total cost more for higher price variability for any location. The dominance result holds for normal, uniform, and gamma distributions. We propose an extended model with more than two suppliers on a plane and show that the dominance result still holds. From numerical examples for a line and a plane, we observe that an optimal location gets closer to the center of gravity of demands as the variability of any supplier’s price increases.