The Theory of Incentives I: The Principal-Agent Model

Because of successful implementations and high intensity, metaheuristic research has been extensively reported in literature, which covers algorithms, applications, comparisons, and analysis. Though, little has been evidenced on insightful analysis of metaheuristic performance issues, and it is still a “black box” that why certain metaheuristics perform better on specific optimization problems and not as good on others. The performance related analyses performed on algorithms are mostly quantitative via performance validation metrics like mean error, standard deviation, and co-relations have been used. Moreover, the performance tests are often performed on specific benchmark functions—few studies are those which involve real data from scientific or engineering optimization problems. In order to draw a comprehensive picture of metaheuristic research, this paper performs a survey of metaheuristic research in literature which consists of 1222 publications from year 1983 to 2016 (33 years). Based on the collected evidence, this paper addresses four dimensions of metaheuristic research: introduction of new algorithms, modifications and hybrids, comparisons and analysis, and research gaps and future directions. The objective is to highlight potential open questions and critical issues raised in literature. The work provides guidance for future research to be conducted more meaningfully that can serve for the good of this area of research.

Metaheuristic research: a comprehensive survey

Supply chain coordination with revenue sharing contracts

A method for multi-class sentiment classification based on an improved one-vs-one (OVO) strategy and the support vector machine (SVM) algorithm

Meta-heuristics are problem-independent optimization techniques which provide an optimal solution by exploring and exploiting the entire search space iteratively. These techniques have been successfully engaged to solve distinct real-life and multidisciplinary problems. A good amount of literature has been already published on the design and role of various meta-heuristic algorithms and on their variants. The aim of this study is to present a comprehensive analysis of nature-inspired meta-heuristic utilized in the domain of feature selection. A systematic review methodology has been used for synthesis and analysis of one hundered and seventy six articles. It is one of the important multidisciplinary research areas that assist in finding an optimal set of features so that a better rate of classification can be achieved. The concept of feature selection process along with relevance and redundancy metric is briefly elucidated. A categorical list of nature-inspired meta-heuristic techniques has been presented. The major applications of these techniques are explored to highlight the least and most explored areas. The area of disease diagnosis has been extensively assessed. In addition, the special attention has been given on highlighting the role and performance of binary and chaotic variants of different nature-inspired meta-heuristic techniques. The summary of nature-inspired meta-heuristic methods and their variants along with datasets, performance (mean, best, worst, error rate and standard deviation) is also depicted. In addition, the detailed publication trend of meta-heuristic feature selection approaches has also been presented. The research gaps have been identified for the researcher who inclines to design or analyze the performance of divergent meta-heuristic techniques in solving feature selection problem.

A Comprehensive Analysis of Nature-Inspired Meta-Heuristic Techniques for Feature Selection Problem

Impacts of trade credit on pricing decisions of complementary products

This paper investigates a wage mechanism design problem faced by a risk neutral firm (he) who employs a risk averse worker (she) to sell products for him. The effort levels of both the firm and the worker are unobservable to each other, which results in bilateral moral hazard. The firm offers a wage contract menu to the worker with the objective of maximizing his expected profit. The results show that the firm will provide the same wage contract to the worker when the worker's effort is observable regardless of the market condition being full or private information. The optimal wage contract is related to the worker's risk averse level when the bilateral moral hazard exists. The information values of the worker's effort and the market condition are studied, respectively. The results show that the firm benefits from the worker's observable effort under full information and only when the sales uncertainty is sufficiently low, can the firm profit from that under private information. Moreover, only if the cost coefficient of the firm's effort is sufficiently high, the firm can benefit from full information in the scenario when the worker's effort is unobservable.

An uncertain wage contract model for risk-averse worker under bilateral moral hazard

Heterogeneous suppliers’ contract design in assembly systems with asymmetric information

The R&D project manager tends to misreport risk aversion magnitude and shirk under uncertain environment for acquiring information rent and risk premium, which brings a significant challenge for the firm when designing compensation contracts. We consider an agency problem where a firm employs a manager who has private information about his risk aversion magnitude and unobservable efforts to implement a R&D project through a menu of incentive contracts. Both the subjective assessments about the risk aversion degree and the project variability are characterized as uncertain variables. Within the framework of uncertainty theory and principal-agent theory, we investigate the impacts of information asymmetry on the optimal compensation contracts and the firm’s profits under four information structures. We demonstrate that, counterintuitive as it sounds, the manager’s optimal contract under full information is the same as that under pure adverse selection. Nevertheless, compared to the case under full information, the firm should distort the commission rate upwards under pure moral hazard and dual asymmetric information. We also show that when the manager’s efforts are observable, hidden information about the risk aversion magnitude has no effect on the firm’s profit. However, when unobservable, private risk aversion degree always brings about information rent and induces a loss for the firm’s profit. Finally, our study provides managerial recommendations on mitigating the adverse impacts caused by asymmetric information.

The impacts of private risk aversion magnitude and moral hazard in R&D project under uncertain environment

The advent of e-commerce has prompted the proliferation of digital platforms for virtual products. This reinforces the importance of the contract design problem between the virtual product supplier (he) and the digital platform retailer (she). The purpose of this paper is to investigate a principal-agent problem in a virtual product supply chain, in which the retailer’s sales-effort investment level to sell the virtual product is unobservable to the supplier, and the market demand is unknown to both parties.,In this study, the supplier designs two kinds of contracts (wholesale price contract and two-part tariff contract) to maximize his profit, while the retailer determines her sales-effort investment level and the virtual product’s retail price. The results of two different types of contracts are compared to explore in depth the effect of contract choices on the participants’ profits.,The authors show that the comparative results of the optimal wholesale prices, retail prices and sales-effort investment levels between these two kinds of contracts all rely on the retailer’s risk-averse degree. Specifically, both the supplier and the whole supply chain prefer the two-part tariff contract rather than the wholesale price contract, the retailer should do opposite when she is low risk-averse, whereas there is no distinction for the retailer’s utilities between these two kinds of contracts when she is more risk-averse.,The value of the research rests on the use of principal-agent theory in the contracts of virtual products considering the retailer’s sales-effort and risk-aversion degree. The research will serve as a guide for the virtual products’ supplier and the platform retailer in decision-making processes.

Yanfei Lan

Papers

Impacts of trade credit on pricing decisions of complementary products

An uncertain wage contract model for risk-averse worker under bilateral moral hazard

Heterogeneous suppliers’ contract design in assembly systems with asymmetric information

The impacts of private risk aversion magnitude and moral hazard in R&D project under uncertain environment

Contract design on digital platform for the risk-averse retailer with moral hazard: Wholesale price vs two-part tariff