Market-based allocation mechanisms for lot-size decision makers and electric power utilities

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Chen, Cheng-Kang
Major Professor
K. Jo Min
Committee Member
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Industrial and Manufacturing Systems Engineering
The Department of Industrial and Manufacturing Systems Engineering teaches the design, analysis, and improvement of the systems and processes in manufacturing, consulting, and service industries by application of the principles of engineering. The Department of General Engineering was formed in 1929. In 1956 its name changed to Department of Industrial Engineering. In 1989 its name changed to the Department of Industrial and Manufacturing Systems Engineering.
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The objective of this dissertation is to investigate how lot-size decision makers and electric power utilities determine critical economic quantities (e.g., the order quantities for the lot-size decision makers and the transmission service charges for the electric power utilities). A primary motivation of this study is to improve the economic efficiency (often measured in terms of cost saving) for lot-size decision makers and electric power utilities;For lot-size decision makers, we extend the traditional economic order quantity (EOQ) model by considering various aspects of model environments such as pricing policies. First, we investigate the inventory and disposal policies for a buyer who is just informed of a temporary sale. It is shown how the buyer determines the optimal inventory and disposal quantities so as to exploit the temporary sale. This inventory model is extended by focusing on the period between the announcement and commencement of a sale. By analyzing the optimal solutions for this extended model, it is shown how the pre-announcement can be utilized to maximize cost saving. Next, we examine an inventory and investment in setup operations model under profit maximization and under return on investment maximization. From the optimality conditions, the optimal order quantity, investment level, and various interesting managerial insights are obtained. Finally, we consider a published multi-product EOQ model with constraints, and examine its optimal inventory and pricing policies. We show that there are two critical errors, and provide correct design and analysis by re-formulating and re-solving the entire model;On the other hand, for electric power utilities, we propose an elementary two-stage trilateral brokerage system for electric power transactions by considering buyers, the sellers, and intermediate transmission utilities. By employing economic analysis and linear programming at each stage, we show that significant gains in economic efficiency can be achieved. Next, we extend this basic model by allowing multiple bids from buyers and sellers and by optimizing over all possible transmission routes to maximize the cost savings. By way of a series of numerical examples, we show how this extended model can improve the economic efficiency of the brokerage system significantly.

Sun Jan 01 00:00:00 UTC 1995