Problem definition: Reward points function as a new currency that consumers can spend on products and services. We study how point redemption affects the seller’s day-to-day pricing and inventory decisions. Academic/practical relevance: Despite widespread use of point redemption, little has been done on its implication on the seller’s operational decisions. This paper extends the revenue management literature to incorporate the impact of point redemption and provides managerial insights on how the seller can factor point redemption into decisions about price and inventory. Methodology: We develop a choice model in which a consumer chooses to pay with cash or points based on the attributes of reservation price, point balance, and the perceived value of a point. We incorporate this choice model into a dynamic model where a seller adjusts the price along with redemption availability and the required point amount. Results: We show that the effect of point redemption on the seller’s price is nontrivial, as the optimal price tilts upward or downward to the reimbursement rate (the compensatory revenue for a reward sale) depending on the inventory level, time, and the reimbursement rate. Furthermore, such price adjustments can attenuate the optimal markup/markdown level, reducing the price fluctuation derived by a dynamic pricing policy in the absence of reward sales. We find that operationalizing reward sales with some discretionary policies (e.g., control over the reward availability or point requirement) can considerably increase the seller’s revenue. Managerial implications: Our results guide how sellers manage prices and inventory dynamically when consumers can redeem points for purchases. Specifically, we show that a seller can benefit from allowing reward sales even when the reimbursement rate is substantially lower than the cash price. Although the seller benefits from having full control over the required point balance, the greatest benefit can be realized via the control of reward availability.

Given that prior research has provided inconsistent findings on the relationship between financial performance and the adoption of environmental management practices (EMPs), we aim to resolve the inconsistency by positing that the firm may consider different components of financial performance when making decisions. Specifically, we maintain that operational efficiency, measured based on net profit margin, is a key determinant of a firm’s decision to adopt EMPs. Additionally, we aim to examine environmental risk as one contingency that moderates the relationship between operational efficiency and EMP adoption. Employing a firm-fixed effect model to examine the effects of various measures of financial performance, including the net profit margin, return on asset (ROA), return on equity (ROE), and asset turnover, on the adoption rates of EMPs by firms, we find that firms with higher operational efficiency measured based on net profit margin are more inclined to adopt EMPs, while measures such as ROA, ROE, and asset turnover do not demonstrate any substantial effect. This study also finds that while environmental risk increases the possibility of adopting EMPs, it weakens the impact of operational efficiency on the adoption rates of EMPs.

The ‘Price of Anarchy’ states that the performance of multi-agent service systems degrades with the agents’ selfishness (anarchy). We investigate a service model in which both customers and the firm are strategic. We find that, for a Stackelberg game in which the server invests in capacity before customers decide whether or not to join, there can be a ‘Benefit of Anarchy’, that is, customers acting selfishly can have a greater overall utility than customers who are coordinated to maximize their overall utility. We also show that customer anarchy can be socially beneficial, resulting in a ‘Social Benefit of Anarchy’. We show that such phenomena are rather general and can arise in multiple settings (e.g. in both profit-maximizing and welfare-maximizing firms, in both capacity-setting and price-setting firms, and in both observable and unobservable queues). However, the underlying mechanism leading to the Benefit of Anarchy can differ significantly from one setting to another.

Many sellers allow consumers to pay with reward points instead of cash or credit card. While the revenue implications of cash and credit card purchases are transparent, the implications of reward sales are not trivial, especially when a firm that issues points is not a seller. In this case, a seller receives a monetary compensation or reimbursement from the point issuer when a consumer purchases the good by redeeming points. In this paper, we examine how reward sales influence a seller’s pricing and inventory decisions. In particular, we consider a consumer who can choose to pay with cash or points based on her attributes – reservation price, point balance, and the perceived value of a point. Then, we incorporate this consumer choice model into a dynamic pricing model where a seller earns revenues from both cash and reward sales. In contrast to an intuition that adding reward sales will increase sales and revenue, we show that the effect of reward sales on the seller’s price is non-trivial as the seller could either add a premium or offer a discount depending on the inventory level, time, and the reimbursement rate. Furthermore, such price adjustments (premium or discount) can attenuate the optimal mark-up or mark-down level, and reduce the price fluctuation caused by inventory level and remaining time. We also investigate several settings where the seller has a different level of operational control over reward sales and show that the seller blocks the reward sales only when the reimbursement rate is very low. That is, allowing reward sales is still better even when the revenue from the reward sales is smaller than the cash sales. In addition, we find that a seller with an ability to control reward availability (i.e., allow a reward sale or not) can achieve a revenue similar to the revenue of a seller with ability to change point requirements and price at the same time.

The paper examines the relationship between a firm’s financial performance and environmental management practices (EMP). Previous studies show inconsistent results on the relationship between return on assets (ROA) and EMP. The paper posits that the firm may consider different components of financial performance when making a decision. The study focuses on the net profit margin and asset turnover, two components of the Dupont analysis, and tests whether they have different effects on EMP adoption. The paper also explores how environmental risk may moderate the impact of operational efficiency on these practices. The study uses data from 2002 to 2013 and finds that firms with higher operational efficiency are more inclined to adopt EMP, while measures such as ROA, ROE, and asset turnover do not demonstrate any substantial effect.

This study examines the effects of customers on the board (COBs) on inventory management. We argue that the human and relational capital provided by COBs helps improve inventory management. Using a comprehensive sample of customer firms, we show that the presence of COBs enhances inventory turnover and reduces bullwhip effects. Cross-sectional analyses indicate that these effects are more pronounced when COBs provide firm-and industry-specific knowledge (human capital) and when private communication is more valuable for managing contingencies (relational capital). Our findings are robust to potential endogeneity concerns, as evidenced by a variety of analyses, including an instrumental variables approach, propensity score and coarsened exact matching, and entropy balancing. Taken together, we extend prior research by documenting that the presence of COBs has positive effects on inventory management.