Abstract: The diffusion of technological innovations in developing economies has been facilitated by the use of Rent-To-Own (RTO) business models, which give flexibility to consumers by allowing them to make incremental payments over time. Understanding how to best manage this flexibility is a fundamental problem for firms operating in these markets. Motivated by an application of RTO to the distribution of solar lamps in developing countries, we examine the drivers and impact of payment flexibility on repayment performance and consumer behavior in RTO contracts. We formulate a stochastic dynamic programming model that characterizes an important dimension of payment flexibility, i.e., the ability of consumers to make bundled payments (multiple installments paid at once, in advance).
We show that consumers may bundle payments because of uncertainty about budget in future periods, which leads to a non-monotonic impact of income uncertainty on repayment performance. We further show that bundled payments are more likely to occur closer to the end of the ownership cycle. We examine different flexibility levers that the firm can adjust as part of its contract design (repayment frequency/installment amount, grace period), accounting for the impact of bundled payments. Our results show that an intermediate level of flexibility could benefit both the firm and consumers under some conditions. Whereas payment flexibility is a fundamental component of RTO contracts in the developing world, our findings indicate that a moderate level of flexibility can go a long way in helping firms and consumers in these environments. Hence, RTO firms may not need to offer extreme degrees of flexibility in order to achieve desirable outcomes. This is an important insight for RTO firms attempting to strike a balance between a sufficient level of flexibility to offer to consumers and good repayment performance.  

Abstract: We study the effects of different liability structures on the performance of microfinance in low- and middle-income countries through an operational lens. Microfinancing with the objective of alleviating poverty has been around for close to 50 years. This objective is important since close to 10% of the world's population lives in poverty. However, microfinancing has had a limited impact on reducing poverty levels. We investigate potential reasons for this limited impact using a Newsvendor with financing and effort. A Base of the Pyramid entrepreneur starts with zero initial budget and borrows a microloan to operate her business. Her utility depends on her production quantity, effort level and business characteristics. The entrepreneur's effort directly influences the success of her business, and we assume it has a multiplicative effect on the stochastic demand for her product. The bank may face bankruptcy costs. We consider a continuum of bank liability structures, varying between a social bank that cannot collect the entire debt in the presence of business losses and a community bank that uses social ties to eventually collect the entire debt. We study these banks under profit-maximizing or zero-profit objectives.
Our study reveals that under any of these microfinancing setups, the effort exerted by the entrepreneur is the main driver of her equilibrium utility. Further, the effectiveness of microfinancing depends on two main factors: the bankruptcy cost and the product's critical fractile. Surprisingly, we show that the community banks' peer pressure mechanism may not always benefit both the entrepreneur and the bank. We establish conditions under which the zero-profit (profit-maximizing) community bank generates higher social welfare than the zero-profit (profit-maximizing) low-liability banks. A numerical study provides additional insights into the effectiveness of moderate-liability banks that have imperfect information on the critical fractile. Our findings suggest that policymakers and non-governmental organizations do not need to impose extreme levels of liability to enhance the effectiveness of microfinancing structures in alleviating poverty. In fact, a moderate liability structure that leverages the benefits of peer pressure while limiting the risk placed on borrowers can lead to desirable outcomes in a financially sustainable fashion.

Abstract: Motivated by the rise of traceability technologies aimed at reducing waste in grocery supply chains, we study a fresh produce system in which a retailer invests in costly, imperfect traceability while a supplier sets wholesale prices and invests in process conformance that affects product freshness. Demand increases with freshness, and waste arises throughout the supply chain. 

We show that traceability can have non-monotonic effects on supplier behavior. When process conformance is costly and baseline freshness is low, traceability encourages higher conformance, making it a complement that improves freshness and reduces waste. When conformance is less costly and freshness is already high, traceability can reduce supplier effort by shifting information rents, turning them into substitutes and potentially increasing total waste.We further analyze waste penalties and traceability subsidies and identify conditions under which both policies improve food availability, reduce waste, and increase profits. We also characterize when traceability subsidies are more effective than waste penalties. Overall, traceability is not universally beneficial for reducing food waste; its impact depends on supplier incentives, costs, and consumer sensitivity to freshness.

Abstract: The gig economy facilitated an increase in express delivery services, such as meals, ride-sharing, and one-day small package delivery, in urban areas. Lateness in express delivery is inevitable and is detrimental to both the user experience and the long-term benefits of platforms providing these services. Therefore, many platforms offer a transportation insurance option (TIO) that provides coverage against the risks of delays with respect to the estimated delivery time.

We investigate the optimal operation of an express delivery with TIO. In particular, we characterize the optimal estimated delivery times to quote in view of  the vehicle routing problem (VRP) in the presence of TIO. We focus on maximizing the total profit while capturing  the demand boosting effect of TIO. 

Our VRP formulation aggregates locations, such as houses within the same community or stations within the same office building, to a single node. We then propose a heuristic  to maximize the platform's profit. We present numerical experiments using real-world data from a meal delivery platform and explore the efficiency gained from the aggregation of locations and our approach compared to the conventional VRP models.

Abstract: According to the United Nations Environment Programme (UNEP, 2024), households accounted for approximately 60% of global food waste in 2022. We study how food delivery platforms affect household food waste through competition, pricing, and information. We introduce an uncertain satiation point, which captures the amount of food beyond which additional consumption provides no value to consumers, and develop a Hotelling model of restaurant competition on a common platform. Our results show that platform efficiency can create a downstream environmental externality: stronger competition and improved matching can lower prices and encourage consumers to order more food than they can use, thereby increasing household food waste. We then examine general and personalized portion-size information as interventions that help consumers anticipate their satiation levels. We characterize conditions under which these nudges reduce waste while improving consumer utility and platform profitability. Our analysis highlights how platform design can generate environmental costs beyond the immediate efficiency gains of intermediation and how information nudges can mitigate these costs.

Abstract: Financial constraints have been listed as one of the biggest obstacles for start-ups or small- and medium-sized enterprises (SMEs). Within the framework of the mutual guarantee financing model (MGF), members of an alliance collectively assume responsibility for repaying the debt to the creditor in the event of default by any member. This research aims to evaluate the impact of mutual guaranteed schemes on overcoming the high ex-post business risk imposed to the creditor when lending to SMEs. We use a newsvendor model with joint financial liability to delve into the impact of MGF agreements on the operational decisions of retailers and their implications for the creditor. The goal of this research is to explore how retailers strategically form alliances under this financial model and devise transfer payment schemes that effectively coordinate the supply chain.