SEMINAR:Product Line Design under Sustainability Incentives...

Guest: Selçuk Karabatı, Koç University

Title: Product Line Design under Sustainability Incentives

Date/Time: 29 May 2024, 13:40

Location: FENS G035

Abstract: Our planet’s delicately balanced ecosystem is under stress due to rapid economic growth fueled by excessive consumption. To address the ever-mounting sustainability concerns, companies are developing strategies and novel business models to minimize the environmental impact of their activities. In this context, the inclusion of environment-friendly or “green” products in product lines is one of the most observed strategies. Although green products are designed to have a smaller carbon footprint than traditional products in terms of raw material supply, energy consumption, recycling, and waste management processes, consumers’ use-phase behavior can cause a green product to have a larger environmental impact than its traditional counterparts.

We study a firm's product line design and pricing problem when standard and green products offer distinctly different environmental performances. We assume that consumers’ valuations of green products are partially driven by their level of “environmental awareness,” and that the market consists of two segments with different awareness levels. We introduce a utility-based consumer demand model and validate it with experiments. We first address the firm’s profit maximization problem, and then integrate it into the regulatory agency’s incentive design problem. The objective of the regulatory agency is to achieve a prespecified improvement in the realized use-phase environmental impact of the products. Through a set of computational analyses, we illustrate the impact of segment sizes and their environmental awareness levels on the product design decisions of the firm and the incentive design mechanism of the regulatory agency.

Bio: Selçuk Karabatı is a Professor of Operations Management at the College of Administrative Sciences and Economics, Koç University. He received his Ph.D. degree in Operations Management from the University of Texas at Austin and holds an M.S. degree in Industrial and Systems Engineering from the University of Southern California, and a B.S. degree in Industrial Engineering from Boğaziçi University. 

His research interests include retail operations management, sustainable operations management, supply chain management, design and planning problems in production systems. He served as

Senior/Associate Editor for Production and Operations Management and IIE Transactions journals. At Koç University, he teaches Service Operations Management, Operations Strategy and Sustainable Operations Management courses.