This thesis, consisting of three essays, focuses on examining firms’ operational decisions in global and sustainable operations management under the influence of regulations.

In the first essay, we study global manufacturers’ sourcing strategies under the influence of tariff regulation. The past decade has witnessed significant movements to push manufacturing back to developed countries. Such movements call for raising import tariffs and increasing consumers’ valuation on products made from locally sourced components. These factors are believed to motivate local sourcing for firms operating in a single market. However, it is not clear whether they are equally effective for multinational firms that produce and sell products in multiple markets. To gain a thorough understanding of this is...[ Read more ]

This thesis, consisting of three essays, focuses on examining firms’ operational decisions in global and sustainable operations management under the influence of regulations.

In the first essay, we study global manufacturers’ sourcing strategies under the influence of tariff regulation. The past decade has witnessed significant movements to push manufacturing back to developed countries. Such movements call for raising import tariffs and increasing consumers’ valuation on products made from locally sourced components. These factors are believed to motivate local sourcing for firms operating in a single market. However, it is not clear whether they are equally effective for multinational firms that produce and sell products in multiple markets. To gain a thorough understanding of this issue, we build a game-theoretical model to analyze the sourcing decision of a global manufacturer that maintains production sites and sells products in both domestic and foreign markets in a competitive environment. The firm can choose to source components from suppliers located in the same markets of the manufacturing sites to gain tariff savings and a price premium from consumers’ higher valuation, or choose to source all components from a single foreign supplier to obtain a lower sourcing cost. We find that the global supply chain structure plays a critical role in the firm’s sourcing strategy. Consumers’ higher valuation for locally manufactured goods always promotes local sourcing. Raising tariffs, however, might backfire and discourage local sourcing because of the firm’s global supply chain structure and the foreign supplier’s strategic response to the higher tariffs. Finally, local sourcing may hurt consumer surplus even though consumers value locally manufactured goods more. Our analysis sheds light on the recent movement to push manufacturing back to developed countries and signifies the importance of accounting for the manufacturer’s global supply chain structure and vertical interaction with suppliers.

In the second essay, we examine firms’ emissions abatement under the influence of carbon regulation. Cap-and-trade and carbon tax are two prevalent carbon policies adopted by governments to reduce emissions and drive clean technology investment. A main difference between these two regulations is that there exist correlated uncertainties in the carbon market and sales market under cap-and-trade. We capture this correlation in uncertainties in the model and analyze how it affects a firm’s technology investment and production decisions. We find that under the cap-and-trade policy, with the uncertainty of the future emission price, the firm could flexibly adjust its production quantity to enhance its profit. Hence, the firm has low incentives to invest in clean technology. However, with an increase of the correlation between the sales market and the permit trading market, the profit driven from the production flexibility is weakened so that the firm has to increase its technology investment to hedge against the future risk of a high emission price. Making a comparison between the cap-and-trade and the carbon tax policies, we find that when the correlation is moderate, the carbon tax policy generates a multi-win situation (i.e., higher expected profit and consumer surplus, more technology investment, and less carbon emissions). Our analysis provides insights for carbon policy design.

In the third essay, we investigate online retailers’ returns management under the influence of platform regulation. Product return rate is very high in online retailing, signifying the importance of returns management. Recently, reselling returns as new has been arising as an emerging strategy for managing returns, which can save retailers significant costs but might cause consumer dissatisfaction due to consumers’ peer-indued fairness concerns. We build a game theoretic model to analyze whether reselling returns as new benefit retailers. We consider an online retailer selling a product to consumers over two periods. In each period, the retailer sets the price and refund for a return for that period. Consumers arrive and make purchase and return decisions. The main catch is that a portion of returns at the end of the first period can be resold as new in the second period. We find that reselling returns as new can benefit the retailer even in the presence of consumers’ peer-induced fairness concerns.