Profit Function Research Articles

Farm households’ input demand and output supply response to price shocks in Nigeria

Panel data on farm household output for a full range of commodities are scarce, and as a consequence, only a few other studies have considered estimating farm household output supply and input demand response to price changes in Nigeria using panel data within the multiple inputs and multiple outputs frameworks. This study examined the extent to which farm households' respond to production inputs and output price changes using panel data covering the period 2010-2016. Specifically, to determine whether a commodity output's price positively affects its supply and other output categories; and whether an input price negatively affects its usage in Nigeria within the multiple input and multiple output (MI-MO) framework. The translog profit function was used to simultaneously examine the production response of farm households' in terms of the factor demand and produce supply. Seven output supply and four input demand equations were estimated. The results indicated that the response of output supply to own price ranged from 0.59 for animal products and 1.24 for cereals. The own-price demand elasticities of farm input range from -0.82 for mechanisation to -1.46 for intermediate inputs. Also, a substantial degree of farm households' response to input price shocks. Farm inputs and outputs were economic complements to price changes. Therefore, price policy issues aimed at improving the production response of farm households' to both input and output price shocks should be developed with a particular focus on farm inputs.

Decision making under service‐level contracts: The role of cost saliency

This study examines human ordering behavior in service‐level inventory contracts, a class of contracts important in practice. Studies of wholesale price contracts find that people tend to place orders that are suboptimal and biased toward mean demand. Unlike wholesale price contracts, service‐level contracts can be parameterized such that they have steep expected profit functions, making the expected profit‐maximizing order more salient, in the sense that deviations from optimal ordering are more costly. Utilizing an analytical model and results from existing literature, we hypothesize that people will order closer to optimality under service‐level contracts with steeper expected profit functions. In a laboratory experiment, we find that subjects achieve up to 97.2% supply chain efficiency under a steep service‐level contract, compared with 92.2% under a flat service‐level contract, and steep service contract ordering also exhibits lower variability. Our results suggest that managers can benefit by designing service‐level contracts with higher penalty costs and lower fill rates.

Economic optimization and predictive control for nonlinear systems using Lyapunov based nonlinear cost function design

Optimal control of physical processes depends on the formulation of objective functions and contemplation of appropriate predictive control. In this article, we propose a new framework, to blend the concepts of the Lyapunov-based economic model predictive control (Ly-EMPC) scheme with the novel cost-efficient profit function design. Furthermore, Lyapunov’s stability criteria is employed to verify the existence of duality and optimality for the designed economic stage costs. This method differs from the existing EMPC techniques by implementing Lagrange multipliers in the rotated cost function as a measure of stability. The closed-loop performance using the regularized Ly-EMPC is validated against a standard tracking objective-based nonlinear MPC for three benchmark examples through an econometrics gauge factor. Interestingly, in contrast to tracking NMPC, the proposed Ly-EMPC scheme excels in economic performance, while the formation of nonlinear economic stage cost is conceptually simpler, novel, and practically profitable.

The impact of information sharing and bullwhip effects on improving consumer services in dual-channel retailing

Data sharing among the supply chain players can be an exceptionally significant factor for the retailing industry. In this consideration, an improved retailing methodology for a dual-channel supply chain with a single retailer and manufacturer is built under the bullwhip effect and asymmetric data sharing. Retailer provides asymmetric information to the manufacturer regarding demand to increase their profit. In this scenario, measuring the bullwhip effect is essential in retailing strategy. By adopting an online-to-offline retailing strategy, industries can earn more profit and increase the satisfaction level of customers. The present study focuses on dual-channel retailing, where the demand for the product in both channels varies with the selling price. Keeping in mind the goal of sustainable development, an advanced transportation strategy is utilized in this study, along with some carbon emission costs. Autonomated inspection is utilized to identify defective products. Finally, centralized and decentralized profit functions are formulated for this study. Several cases and numerical examples are provided to validate this study. It is clear from the numerical findings that information sharing within the players provides 1.26% more profit compared to a decentralized case. Due to asymmetric information, which leads to the bullwhip effect, the retailing system faces loss. Thus, information sharing is 0.19% beneficial for dual-channel retailing. Sensitivity analysis for key parameters ensures the findings' applicability in the real world.

Measuring the efficiency and productivity of U.K. insurance market

AbstractThe U.K. insurance industry has a dominant international presence, suggesting strong competitiveness and performance. Yet, its efficiency and productivity has rarely being investigated. The purpose of this paper is to provide an overview of insurers' performance in the U.K. insurance market from 1996 to 2017, using stochastic frontier analysis to measure efficiency scores and productivity at the firm level. Results show the U.K. insurance industry could improve by about 40% in terms of cost efficiency and by 70% in terms of profit efficiency. In addition, our model reveals a higher cost efficiency score compared to profit efficiency, implying that there are higher inefficiencies on the income side of the insurance industry as measured by our profit function. In terms of total factor productivity (TFP) growth, we report a steady decline over time while on average is negative. By decomposing TFP growth into its underlying components, we reveal that the reported negative trend in TFP growth over time has mainly been driven by the enhanced competition that resulted in a drop in markup, while the scale and cost efficiency has also driven TFP growth down. However, from a positive point of view, we report evidence of both β‐convergence and σ‐convergence in cost and profit efficiency.

More on the profit shifting costs function. Analysis of the literature and other modelling approaches

In this paper, we study another approach to the profit shifting costs function of multinational profit shifting. First, we describe the modelling approaches of such costs functions and provide a synthesized analysis. More precisely, we investigate the involved resource costs that multinational firms incur through a tax-motivated reallocation of profit across tax jurisdictions. Second, we set up a simple theoretical model of a representative multinational firm within which we conceptualize our new cost function. We expand the literature by including a relationship between profit shifting costs and tax uncertainty. Furthermore, we describe the costs split, the property of our costs function and we express its parameters. Finally, we discuss our results in conjunction with the literature, emphasizing that profit shifting costs and tax uncertainty cause more concerns for developing countries than advanced economies.

Decomposing profit change: Konüs, Bennet and Luenberger indicators

We introduce complementary decompositions of profit change that, relying on the duality between the profit function and the directional distance function, shed light on the different sources of profit growth including measures of technical efficiency, allocative efficiency and technological change. Our decompositions extend the literature on Konüs and Bennet quantity and price indicators to profit change. The first decomposition is ‘exact’ in the sense of Diewert, by completely exhausting the sources of profit change into profit inefficiency change (including technical and allocative inefficiency change), technological change, and output and input price change. The second decomposition equates the Bennet quantity indicator to a productivity measure represented by the Luenberger indicator plus allocative inefficiency change. We deem it ‘complete’ because in contrast to the existing literature, it retains the information on allocative inefficiency change while preventing the existence of residual terms capturing price variations, whose meaningful interpretation has not been addressed until now. Our proposed solution takes advantage of the flexibility of the directional distance function when choosing a suitable directional vector. All decompositions have the same structural form and therefore their components can be compared to each other vis-à-vis, providing alternative measures of equivalent sources of profit growth.

Consumer strategy, vendor strategy and equilibrium in duopoly markets with production costs

We study consumer strategy, vendor strategy and their equilibrium in a duopoly market where vendors bear the costs in the production process. If consumers have an identical preference that is unknown, we obtain the equations satisfied by the total social surplus and the profit of each vendor. Moreover, we prove that the second derivatives of the total social surplus function and the profit function are continuous at the cutoff by the well-known conditions of value matching and smooth pasting. In a duopoly market, vendors can increase the total social surplus by adjusting their output, which causes fewer profits for vendors. However, rational vendors usually do not make such concessions, which implies that it is almost impossible to maximize total social surplus in a duopoly market. Thus, the planner needs to control vendors’ output to maximize the total social surplus. We obtain the planner’s optimal strategy and the socially efficient allocation. When vendors and consumers maximize their value, we find that the price of goods may be less than their costs due to price competition. By Bayesian learning and price competition model, we discuss a Markov perfect equilibrium and the relationship between the socially efficient allocation and the Markov perfect equilibrium.

Decomposing Economic Efficiency into Technical and Allocative Components: An Essential Property

We introduce two desirable properties concerning the allocative efficiency term in the decomposition of economic efficiency. Since Farrell, economic efficiency, defined in terms of the cost, revenue, profitability, or profit functions, is decomposed into a technical efficiency measure and allocative efficiency. Resorting to duality theory, allocative efficiency is calculated as a residual. In this framework, we show that this residual is numerically inconsistent for several economic efficiency decompositions: those based on the Russell Efficiency Measures, the Slack-Based Measure and the Weighted Additive Measures. It should be expected that a technical inefficient firm, if projected to the optimal economic benchmark, e.g., that maximizing profit, should be allocative efficient, yet we show that the above decompositions may signal that it is allocative inefficient. Our first property, called ‘essential,’ demands that economic efficiency decompositions satisfy the above criterion. We also extend this property by requiring that the allocative efficiency of a technically inefficient firm, evaluated at the projected benchmark on the production frontier, coincides with the allocative efficiency of the benchmark itself. Regarding this extension of the property, we show that, besides the measures mentioned above, the Directional Distance Function and the Hölder Distance Function fail in general to comply with it. However, we also prove that, thanks to the flexibility of these two approaches in choosing a common directional vector for all the assessed firms or a specific Hölder norm, these measures may satisfy the extended essential property. We conclude that unless both properties are fulfilled, the (residual) allocative component of many previously published decompositions cannot be correctly interpreted as price inefficiency.

Bidding to procure supply in newsvendor networks

We develop a model to determine the optimal bids a trade agent submits to sellers in a B2B market. The trade agent bids at multiple supply locations and allocates the goods procured after bidding to fulfill the demand of multiple clients. We analyze the structural properties of the trade agent's expected profit function and the optimal bids.

Impact of an exogenous shock (COVID-19) on the performance of Portuguese wine firms: a structural break analysis

ABSTRACT The COVID-19 pandemic crisis was responsible for disruptions in most industries worldwide, being the wine industry a good example of how changes in the economic and social environment impacted firm performance. This research investigates whether such impacts represent a structural change to firms’ profitability and explore the internal sources of such change. We consider firm-level data from Portuguese wineries, from 2014 to 2020 and apply a series of structural break tests to the period. The results allow us to conclude that the entire profitability function suffered significant changes, being COVID-19 indeed a game-breaker for wineries’ profitability.

A green realistic inventory model with preservation technology for deteriorating items under carbon emission

Greening efforts are the steps taken to control the hazardous activities by different factories and to take environment-friendly steps which cause the least harm to nature. People buy products more which are green in nature. In this study, an inventory model is articulated in which demand is reliant on selling price and greening efforts. Here, all unit quantity discount is assumed. The purchasing cost is reliant on order size besides holding cost is reliant on time. By using greening efforts, a retailer can earn more profit. The aim of this study is to find a profit function that is taken to be dependent on greening efforts, cycle time, and selling price. The main aim of this paper is to earn more profit by using preservation technology and by allowing a carbon tax. The deterioration rate cannot be ignored so preservation technology is used here to overcome the effect of worsening. To find the optimal answer, an algorithm is developed. Concavity is shown through 3D graphs. Mathematical examples and sensitivity analysis is also done to validate the results.

한⋅일 은행산업의 메타효율성 비교: 이윤을 바탕으로

Purpose: This study aims to improve the competitiveness of the domestic banking industry by diagnosing the efficiency of the Japanese and Korean banking industries, which have similar financial environments such as long-term low growth and low interest rates.
 Research design, data, and methodology: The research method uses probabilistic frontier analysis (SFA) and the form of a profit function based on five years (2015- 2019) data for 35 banks in Korea and Japan. This study estimates the individual frontiers of Korean and Japanese banking groups, and estimates the meta-frontiers that encompass the individual frontiers of Korean and Japanese banks operating with different technologies. In addition, the international technology gap between two countries is measured and meta-profit efficiency is calculated using the profit efficiency of each country and the international technology gap. Through this verification process, the management characteristics of countries leading the meta-frontier and the banking industry in that country are confirmed.
 Furthermore, we regressively analyze the determinants of inefficiency for the profit and technology gap of the two national banking groups and draw implications. This study differs from previous studies in that it uses a probabilistic frontier analysis and a profit function for the international banking industry from a profit perspective.
 Results: As a result of empirical analysis, first, in terms of profit efficiency by country, the Bank of Korea group is more efficient. However, in the international technology gap, the Japanese banking group is considerably ahead of Korea. Accordingly, in terms of meta profit efficiency, the Japanese banking group is ahead of Korea, which is due to the international technology gap. Second, the meta profit efficiency of Japan’s three major urban banks is the highest with an average of 0.91 for five years, and among them, Mitsubishi UFJ Bank was found to be the leading bank among all the research target banks. Third, it was analyzed that the profit efficiency improvement effect occurs only when the market concentration (HHI index) of both countries’ banking groups is increased and the net loan ratio is lowered.
 Implications: Therefore, it was suggested that the banking industry of the two countries should increase their market dominance by increasing the beneficiary assets other than loans, because the increase in bad debts due to credit risk increases as the amount of loans increases and negatively affects the efficiency of banks.

Multi T1-weighted contrast imaging and T1 mapping with compressed sensing FLAWS at 3T.

The Fluid And White matter Suppression (FLAWS) MRI sequence provides multiple T1-weighted contrasts of the brain in a single acquisition. However, the FLAWS acquisition time is approximately 8min with a standard GRAPPA 3 acceleration factor at 3T. This study aims at reducing the FLAWS acquisition time by providing a new sequence optimization based on a Cartesian phyllotaxis k-space undersampling and a compressed sensing (CS) reconstruction. This study also aims at showing that T1 mapping can be performed with FLAWS at 3T. The CS FLAWS parameters were determined using a method based on a profit function maximization under constraints. The FLAWS optimization and T1 mapping were assessed with in-silico, in-vitro and in-vivo (10 healthy volunteers) experiments conducted at 3T. In-silico, in-vitro and in-vivo experiments showed that the proposed CS FLAWS optimization allows the acquisition time of a 1mm-isotropic full-brain scan to be reduced from [Formula: see text] to [Formula: see text] without decreasing image quality. In addition, these experiments demonstrate that T1 mapping can be performed with FLAWS at 3T. The results obtained in this study suggest that the recent advances in FLAWS imaging allow to perform multiple T1-weighted contrast imaging and T1 mapping in a single [Formula: see text] sequence acquisition.

On Some Reflections of Profit and Loss Functions

This article is about the symmetrical reflections of profit and loss functions and the functions obtained from them, which are widely used in economic, economic and financial applications of mathematics. It is seen that the applications in the literature are calculated according to the profit and loss accounts alone. Since the occurrence of loss in an economic activity negatively affects the result of the profit, as a result of the loss, economic activity bankruptcy, etc. decisions are finalized. This has irreversible consequences. The controllability of these two interactive events poses reassuring risks. In short, it enables the manageability of the activity. Applications in life take place on a more real axis. To control, to see the whole event, thus providing the possibility of intervention. Therefore, it started with linear functions in the plane. Evaluations were made on the graphics here.
 The system concepts existing in Mathematical Science, their results in applications, especially in economic activities in the market were examined and their symmetrical reflections with respect to each other were examined. Starting from the reflections of the known profit and loss functions, their interactions with each other were investigated [4]. How the break-even point was reflected according to these reflections, and therefore what they did was examined. The reflection of profit and loss functions according to another function was discussed. This makes it necessary for the control, planning and implementation of the situations observed in an economic activity, which are known in market economies. Therefore, it was emphasized that when the price will change in an economic activity, it will be more important to monitor and manage, and even at what stage the advertisements will be made, as a result of reflections. The loss curve is negatively sloping due to price, reflecting new information on the condition of its slope. It was emphasized that the reflections of the determining factors in marketing vary so much. As is known, prices simultaneously reflect both the value for the buyer of the next (or marginal) unit and the cost for the seller of that unit.

Effectiveness of carbon policies and multi-period delay in payments in a global supply chain under remanufacturing consideration

Carbon emission regulation is one of the most important priorities for the business sector. The rate of carbon generation increases tremendously due to several issues like transportation, repair, or remanufacture. The generation of faulty or imperfect items increases during transportation. Instead of returning them, the retailer can remanufacture/repair those faulty products in their repair shop and sell them to customers as the new product. Carbon dioxide is emitted from this repair shop continuously. In this study, the retailer remanufacturers faulty items under different carbon emission reduction policies and multi-period trade credit financing to control the shortage. Shortages arise due to imperfect products. Three carbon emission reduction policies are reviewed and compared in the context of different credit financing and investments to find the maximum profit. The adaptation of investment is beneficial to reduce carbon emissions and increase the profit of the system. Nine models are built based on long-term credit financing and carbon regulation policies. Analytical approaches are used to find solutions for complex nonlinear profit functions. Numerical illustrations prove that if cycle time is less than the permitted delay period, the system’s profit is 2.58% and 56.76% higher than the other two cases. Limited carbon regulation provides 0.23% and 0.16% better profit than the other two carbon reduction policies. Green investment increases the system profit by 0.063% and reduces emissions by 112 kg per cycle. Adaptation of trade credit policy increases the profit up to 1.55%. Finally, it is noticeable that limited carbon regulation is the best policy when the permissible delay in payment period is greater than the cycle time with remanufacturing under-investment.

Revealed preference tests for price competition in multi-product differentiated markets

Assumptions of competitive structure are often crucial for marginal cost estimation and counterfactual predictions. This paper introduces tests for price competition among multi-product firms. The tests are based on the firm’s revealed preference (revealed profit function). In contrast to other approaches based on estimated demand functions such as conduct parameter estimation, the proposed tests do not require any instrumental variables, even though the models can accommodate structural error terms. In this paper, I employ a demand structure introduced by Nocke and Schutz (Econometrica 86(2):523–557, 2018. https://doi.org/10.3982/ECTA14720), the discrete/continuous choice model, which nests the multinomial logit demand and CES demand functions. Any price and quantity data can be rationalized by price competition under a discrete/continuous choice model and increasing marginal costs. Adding more assumptions to the demand functions, such as logit, CES, or the co-evolving and log-concave property produces some falsifiable restrictions.

Power Battery Recycling Mode and Decision-making Model for New Energy Vehicles Under the Background of Dual Carbon

Recycling and cascade utilization of waste power batteries for new energy vehicles is an effective measure to manage carbon emissions in the power battery industry chain and achieve the dual carbon target. In view of the current confusion of recycling channels and the unclear benefits and costs of the recycling market, the article constructs three recycling modes: self-operated recycling mode, industry alliance recycling mode and third-party enterprise recycling mode. With profit maximization as the decision-making goal, a recycling profit function model is established, and through the comparative analysis of profits of different recycling modes, the relationship and influencing factors between them are obtained, which can provide reference for enterprises to make recycling decisions.

A quantitative analysis of inaccuracy inventory reducing in multi-period mode: Comparison between RFID and inventory counting

Inventory management decisions are one of the essential factors influencing the profitability of each supply chain member. However, in the real world and due to errors, the physical inventory and the inventory on the information system are frequently not matched, impacting the decision-making regarding inventory control. As a result, managers are constantly looking for ways to eliminate or reduce inventory errors. This study examines a retailer’s inventory control problem with transaction errors over time. For this purpose, a single-item multi-period model that adheres to a periodic review policy will be used. Therefore, the impact of two solutions, inventory counting and using RFID technology, on eliminating or reducing errors is assessed. In the section on inventory counting, unlike most papers that consider a counting cycle for inventory, it will be determined at the end of which period the inventory counting should be performed by acquiring the profit functions and their parameters. Also, when using RFID technology, it may occasionally fail to track the products, so the profit function is acquired with this error rate in mind. Moreover, it is determined when the inventory on the information system should be reset to eliminate errors accumulated over time. Furthermore, because these solutions each have costs, the discrete-event simulation approach calculates their profitability. Also, the profit changing of these solutions will be analyzed about various parameters.

Slicing-based resource optimization in multi-access edge network using ensemble learning aided DDPG algorithm

Recently, the technological development in edge computing and content caching can provide high-quality services for users in the wireless communication networks. As a promising technology, multi-access edge computing (MEC) can offload tasks to the nearby edge servers, which alleviates the pressure of users. However, various services and dynamic wireless channel conditions make effective resource allocation challenging. In addition, network slicing can create a logical virtual network and allocate resources flexibly among multiple tenants. In this paper, we construct an integrated architecture of communication, computing and caching to solve the joint optimization problem of task scheduling and resource allocation. In order to coordinate network functions and dynamically allocate limited resources, this paper adopts an improved deep reinforcement learning (DRL) method, which fully jointly considers the diversity of user request services and the dynamic wireless channel conditions to obtain the mobile virtual network operator (MVNO) maximal profit function. Considering the slow convergence speed of the DRL algorithm, this paper combines DRL and ensemble learning. The simulation result shows that the resource allocation scheme inspired by DRL is significantly better than the other compared strategies. The output of the result of DRL algorithm combined with ensemble learning is faster and more cost-effective.