• International Area Studies Review
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• v.12 no.3
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• pp.49-67
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• 2008

In this paper, we address the problem of optimal monetary policy rule in the presence of abrupt shifts in the structure of the economy. To do so, we first estimate a Markov switching model for the US housing price inflation, and find evidence supporting the presence of two distinct regimes for the US housing price inflation. One of the two regimes identified appears 'usual', in that housing price inflation negatively responds to higher real interest rate. The other regime is 'unusual', in that the housing price inflation is positively related with real interest rate. We then solve an optimal control problem of the FRB under the presence of the two regimes thus identified. The optimal policy is 'asymmetric' in that the optimal responses in the 'usual' regime require the FRB to lean against the wind to inflationary pressure, while the FRB is recommended to accommodate it in the unusual regime. It is also found that the optimal degree of responses is more conservative when the FRB acknowledges the uncertainty about future regime.

• Korean Management Science Review
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• v.32 no.1
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• pp.83-100
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• 2015

We analyze a duopoly competition when two firms face input cost increases. The objective of this study is to determine the firms' optimal strategy between a price increase and downsizing under conditions of a spatially differentiated market and consumers' diminishing utility on the product size. We develop a theoretical model of two competing firms offering homogenous products using the standard Hotelling model to determine how firms' optimal strategies change when facing input cost increases. In this paper, there are two types of duopoly competitions: symmetric and asymmetric. In the symmetric case, the two firms have the same marginal cost and are producing and selling identical products. In the asymmetric case, the two firms have different marginal costs. The results show that the optimal strategy decision depends on the size of the input cost increase and the cost differences between the two firms. We find that when two firms are asymmetric (i.e., they have different marginal costs), the two firms might choose asymmetric pairs of strategies in equilibrium under certain conditions. When the cost differences between the two firms are sufficiently large and the cost increase is sufficiently small, the cost leader chooses price increase, and the cost-disadvantaged firm chooses downsizing in equilibrium. This asymmetric strategy reduces price competition between two firms, and consumers are better off. When the cost differences between the two firms are sufficiently large, downsizing is the dominant strategy for the cost-disadvantaged firm. The cost-disadvantaged firm finds it more profitable to reduce the product size than to increase its price to reduce price competition, because consumers prefer downsizing to price increases. This paper might be a good starting point for further analytical research in this area.

• Industrial Engineering and Management Systems
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• v.12 no.3
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• pp.207-223
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• 2013

Revenue management (RM) has been widely used to model products characterized as perishable. Classical RM model assumed that price is the sole factor in the model. Thus price adjustment becomes a crucial and costly factor in business. In this paper, an optimal pricing model is developed based on minimization of soft customer cost, one kind of price adjustment cost and is solved by Lagrange multiplier method. It is formed by expected discounted revenue/bid price integrating quantity-based RM and pricing-based RM. Quantity-based RM consists of two capacity models, namely, booking limit and overbooking. Booking limit, built by assuming uncertain customer arrival, decides the optimal capacity allocation for two market segments. Overbooking determines the level of accepted order exceeding capacity to anticipate probability of cancellation. Furthermore, pricing-based RM models occupancy/demand rate influenced by internal and competitor price changes. In this paper, a mathematical model based on game theoretic approach is developed for two conditions of deterministic and stochastic demand. Based on the equilibrium point, the best strategy for both hotels can be determined.

• Industrial Engineering and Management Systems
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• v.8 no.1
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• pp.1-13
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• 2009

This paper presents a coordinated planning model of price-dependent demand for a single-manufacturer and a single-retailer. The demand is assumed to be normally distributed, with its mean being price dependent. The manufacturer and retailer coordinate with each other to jointly and simultaneously determine the retail selling price and the retailer order quantity to maximize the joint expected total profit. This model is then compared to a 'returns' policy model where manufacturer buys back unsold items from the retailers. It is shown that the optimal total profit is higher for coordinated planning model than that for the returns policy model, in which the retail price is set by the retailer. A compensation or profit sharing scheme is then suggested and it is shown that the coordinated model with profit sharing yields a 'win-win' situation. Numerical results are presented to illustrate the profit patterns for both linear and nonlinear demand functions. The coordinated planning model, in addition, has a lower optimal price than for a returns policy model, which would result in higher sales, thus expanding the markets for the whole supply chain.

• Clean Technology
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• v.28 no.2
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• pp.138-146
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• 2022

Electricity has become a factor that dramatically affects the market economy. The day-ahead system marginal price determines electricity prices, and system marginal price forecasting is critical in maintaining energy management systems. There have been several studies using mathematics and machine learning models to forecast the system marginal price, but few studies have been conducted to develop, compare, and analyze various machine learning and deep learning models based on a data-driven framework. Therefore, in this study, different machine learning algorithms (i.e., autoregressive-based models such as the autoregressive integrated moving average model) and deep learning networks (i.e., recurrent neural network-based models such as the long short-term memory and gated recurrent unit model) are considered and integrated evaluation metrics including a forecasting test and information criteria are proposed to discern the optimal forecasting model. A case study of South Korea using long-term time-series system marginal price data from 2016 to 2021 was applied to the developed framework. The results of the study indicate that the autoregressive integrated moving average model (R-squared score: 0.97) and the gated recurrent unit model (R-squared score: 0.94) are appropriate for system marginal price forecasting. This study is expected to contribute significantly to energy management systems and the suggested framework can be explicitly applied for renewable energy networks.

• Industrial Engineering and Management Systems
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• v.13 no.3
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• pp.304-318
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• 2014

It is necessary for a retailer to improve responsiveness to uncertain customer demand in product sales. In order to solve this problem, this paper discusses an optimal operation for a 2-stage-ordering-production system consisting of a retailer and a manufacturer. First, based on the demand information estimated at first order time $t_1$, the retailer determines the optimal initial order quantity $Q^*_1$, the optimal advertising cost $a^*_1$ and the optimal retail price $p^*_1$ of a single product at $t_1$, and then the manufacturer produces $Q^*_1$. Next, the retailer updates the demand information at second order time $t_2$. If the retailer finds that $Q^*_1$ dissatisfies the demand indicated by the demand information updated at $t_2$, the retailer determines the optimal second order quantity $Q^*_2$ under $Q^*_1$ and adjusts optimally the advertising cost and the retail price to $a^*_2$ and $p^*_2$ at $t_2$. Here, decision-making approaches for two situations are made-a decentralized supply chain (DSC) whose objective is to maximize the retailer's profit and an integrated supply chain (ISC) whose objective is to maximize the whole system's profit. In the numerical analysis, the results of the optimal decisions under DSC are compared with those under ISC. In addition, supply chain coordination is discussed to adjust the unit wholesale price at each order time as Nash Bargaining solutions.

• Journal of the Korean Operations Research and Management Science Society
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• v.38 no.3
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• pp.87-101
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• 2013

The purpose of this paper is to analyze supplier's optimal decision of the buyback price facing irrational retailers. It has been known that retailers show irrational ordering behaviors, such as pull-to-center effect. We model the retailer's pull-to-center behavior and derive the supplier's optimal buyback price considering the retailer's bounded rationality. The result shows that the supplier's profit can be significantly improved exploiting the retailer's irrationality in the ordering behavior.

• Proceedings of the KIEE Conference
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• 2000.07a
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• pp.13-15
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• 2000

This paper suggests the optimal dispatch method by MLF, that gives the appropriate price signal considering power flow and system losses under zonal pricing market. This price signal with MLF effects to dispatch merit order and customer price in the short term, and to connection point of new plant in the long term. In the case study, optimal MLF dispatch method applied to simplified Korean power system. The result shows reduction of loss and northward flow.

• ETRI Journal
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• v.10 no.4
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• pp.146-160
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• 1988

The purpose of the present study is to build a model to determine the structure of long-term quasi-optimal rates of local and toll telephone services. The outline of this study is as follows : Telephone business, providing social goods, is capital-intensive industry which needs huge fixed cost to operate exchanges and telephone networks nationwide. The nature of above industry justifies the market structure of telephone business to be natural monopoly and makes a good reason for government's direct regulation, that is, price regulation. Three is a gap between the present rates and the quasi-optimal ones because some administrative processes intervene in rate making process before execution. On the above diagnostic basis, the present study made an empirical test for the optimality of present rates structure in connection with Ramsey-Boiteux model to maximize the sum of producer's and consumer's surplus and also the current study proposed a qusasi-optimal rates structure for better market performance. From the empirical analysis, we can deduce a policy recommendation the local price should be increased to 47% whereas toll price decreased to 24% in order to improve the net welfare worth of 32.6 billion won.

• The Journal of The Korea Institute of Intelligent Transport Systems
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• v.2 no.1 s.2
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• pp.85-92
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• 2003

Due to the expansion of freeway networks in Korea, drivers have more routes to choose. Traffic information on various alternative roadway sections and routes may help drivers choose the optimal route that minimizes travel time or cost. Traffic information on roadways is, therefore, invaluable in sense that individual drivers could reduce their travel time or cost by selecting optimal routes, and furthermore total travel cost of the system could be lowered. However, consensus about the price of traffic information that drivers are willing to pay is not made yet. Current price of traffic information is decided according to the price of similar information such as stock, weather and so on. To investigate the value of traffic information, a survey was conducted at freeway rest areas near Seoul Megalopolis area including Kyunggi Province. Eight hundred drivers who had travelled on freeway within a year were randomly selected. Purposive Quota Sampling was used. A price-response function, a relationship between price and sales, was obtained based on the survey, followed by sensitivity analysis