Designing Intervention Strategy for Public-Interest Goods
Tarih: -
Konum: Senate Meeting Room
Speaker: Dr. Ece Zeliha Demirci, Eindhoven University of Technology
Abstract: Public-interest goods, which are also referred as goods with positive externalities, create benefits to individual consumers as well as non-paying third parties. Some significant examples include health related products such as vaccines and products with less carbon emissions. When positive externalities exist, the good may be under-produced or under-supplied due to incorrect pricing policies or failing to value external benefits and that is why a need for intervention arises. A central authority such as government or social planner intervenes into the system of these goods so that their adoption levels are increased towards socially desirable levels. The central authority seeks to design and finance an intervention strategy that will impact the decisions of the channel in line with the good of the society, specified as social welfare. A key issue in designing an intervention mechanism is choosing the intervention tools to incorporate. The intervention tools can target the supply or demand of the good. One option for the intervention tool is investment in demand-increasing strategies, which affects the level of stochastic demand in the market. Second option is investment in strategies that will improve supply of the good. Alternatives for this option include registering rebates or subsidies and investment in yield-improving strategies when production process faces imperfect yield.
As several real life cases indicate, central authority operates under a limited budget in this environment. Thus, we introduce and analyze social welfare maximization models with the emphasis on optimal budget allocation. We model the lower level problem, which represents the channel as a newsvendor problem. We then utilize bilevel programming for modeling the environment incorporating the role of central authority. After obtaining single level equivalent formulations of the problems, we analyze and solve them as non-linear programs. In this talk, examples on social welfare maximizing problems for public-interest goods will be presented.
Bio of the speaker: Dr. Ece Zeliha Demirci received B.S., M.S., and Ph.D. degrees from Industrial Engineering Department of Bilkent University. Currently, she is a postdoctoral researcher at the Industrial Engineering and Innovation Sciences Department of Eindhoven University of Technology. Her research interests are supply chain management, sustainable operations, and maintenance and spare parts planning.