My dissertation focuses on issues related to social responsibility and sustainability in operations management.

Essay 1 (Fairness in Competitive Pricing; Chapter 2): The loyalty penalty refers to a pricing strategy where companies charge higher prices to loyal customers for exploitation while offering lower prices to non-loyal customers for attraction. To address this unfair business practice, various regulatory agencies, such as the CMA and FCA in the UK, have proposed or implemented regulations aimed at promoting fairness in pricing. In this study, we analyze the impact of such regulations on both firms and consumers. We develop a stylized model to investigate duopoly competition in two symmetric markets, where consumers exhibit loyalty to different firms in each market. The regulato...[ Read more ]

My dissertation focuses on issues related to social responsibility and sustainability in operations management.

Essay 1 (Fairness in Competitive Pricing; Chapter 2): The loyalty penalty refers to a pricing strategy where companies charge higher prices to loyal customers for exploitation while offering lower prices to non-loyal customers for attraction. To address this unfair business practice, various regulatory agencies, such as the CMA and FCA in the UK, have proposed or implemented regulations aimed at promoting fairness in pricing. In this study, we analyze the impact of such regulations on both firms and consumers. We develop a stylized model to investigate duopoly competition in two symmetric markets, where consumers exhibit loyalty to different firms in each market. The regulatory intervention mandates that the price difference between the two markets, set by each firm, must not exceed a certain threshold. Our analysis reveals an intriguing interaction between market competition and price fairness regulation. When competition is intense, fairness regulation can alleviate cutthroatcompetition between firms, resulting in Pareto improvements compared to a scenario with no regulation. On the other hand, when competition is weak, fairness regulation can further enhance firms’ existing monopoly power, potentially leading to collusive high prices that are detrimental to consumers and society. We also consider several extensions to enrich our findings, including fairness regulation on relative price discounts, asymmetric markets, and a two-pronged policy regulating the price gap and price cap.

Essay 2 (Privacy in Product Recommendation; Chapter 3): Personalized product recommendations are essential for online platforms, but they raise privacy concerns due to the risk of inference attacks. To address this issue, we propose personalized recommendation policies that adhere to differential privacy constraints. We study a theoretical model where the recommendation policy selects products to recommend based on consumers’ preference rankings learned from personal data like cookies. By implementing differential privacy, we introduce randomness into the recommendation outcomes, preventing inference attacks. Our analysis shows that the optimal policy is a coarse-grained threshold policy, where products are randomly selected, with a subset having higher recommendation probabilities than the remaining options. The priority subset is determined by a threshold applied to the consumer’s preference ranking. We examine the choice of this threshold in the asymptotic regime with a large number of products, which is relevant to most online platforms. Additionally, we explore the economic implications of privacy protection. If product prices are exogenously determined, privacy protection reduces consumer surplus for sure due to the decreased match value of the recommended product. However, when retailers optimally set prices, we find that the impact of privacy protection on surplus is non-monotonic due to the trade-off between recommendation accuracy and price inflation.

Essay 3 (Emission Permits Regulation; Chapter 4): To mitigate the impact of industrial emissions of pollutants such as sulfide, wastewater, and carbon dioxide on the environment, regulatory agencies often implement emission permits policies. This paper investigates the efficacy of such policies across different levels of temporal flexibility in compliance (e.g., stipulating different compliance period lengths, allowing/prohibiting inter-temporal banking and borrowing of emission permits). Our analysis indicates that temporal flexibility in compliance may not always be advantageous for firms, and even have negative effects on society. This is particularly true for industries that deal with hazardous pollutants, have high emission intensity, face volatile production costs, operate in highly competitive markets, experience relatively short-term pollution damage, or possess intermediate abatement capabilities. We also explore more advanced permits policies, such as restricted permits transfer, hybrid policies that involve permits and taxes, and permits trading.