We would like to thank all the faculty, graduate students andthe alumni who played such a significant rolein the success of the debut volume of

The OR Times

. We had three enlightening issuesin the fall of 2007, all of which were ap-plauded by the readers. We also wish to ac-knowledge the department of IMSE for foot-ing the printing bills and ensuring that the issued werelaunched on the planned dates.INFORMS USF Student Chapter was established in2005 and currently has 45 members all of whom students inthe Industrial Engineering sub division. We encourage gradu-ate students in the Engineering Management division to jointhe Association, a process which can be easily fulfilledthrough OASIS.We had several accomplishments in Fall 2007, somewhich include: A fundraiser at the department, whereINFORMS treated the entire department with internationalcuisines. INFORMS participated in the Annual Conference inSeattle with 12 presentations from members. We participatedin cheering the USF football team at the Raymond James Sta-dium, during their match against the University of Louisville.This year, we begin the second volume with an excit-ing issue with articles on the several aspects on the role ofIndustrial Engineers in Revenue Management, Political Sci-ence and Power Markets. We would like to solicit articles forupcoming issues. Send your articles towotieno@mail.usf.edu.

By Wilkistar Otieno, The OR Times Editor

Revenue Management and the Airline Industry:

Revenue management was born in the earlyeighties in the airline industry. Its roots can betraced to the pioneering research of Littlewood;a British Mathematician in 1972. Revenue man-agement was used by American Airlines tocounter the challenge posed by PeopleExpress – a low-costairline that offered low prices for

every

ticket. American Air-lines recognized that by offering some seats at the low faresoffered by PeopleExpress and some

with special features

athigher fares, they could regain market from PeopleExpress. Itworked, and with time, these strategies blossomed into whatis now known as revenue management (RM).RM is sometimes defined as the science used to sellportions of perishable inventory, such as the seats on an air-plane or the rooms in a hotel, at different fares (prices) todifferent customers in order to maximize revenues. For themost part, RM deals with the revenue side of the business,unlike supply chain management which primarily focuses onthe cost side. Outside of the airline industry, RM is nowwidely used in hotels, casinos, cruise-lines and sports.Computerized systems, e.g., ERP systems, havemade it possible to collect vast amounts of customer informa-tion. It is vital for revenue managers to recognize differencesin customers’ purchasing habits. Offering the right fares at theright time requires accurate market segmentation. The othertrend that has boosted RM is the rise of e-commerce.Because of the internet, market monitoring, changing pricesand advertising of products have become much easier.Today, we are in the middle of some challengingtimes for RM in the airline industry. Many large companieswere recently on the verge of bankruptcy. 9/11 was a bigblow to airlines. After 9/11, people were flying less, and manybusinesses had changed their models to function without airtravel. The economy was weakened and it has never recov-ered. The airline network restructure hurt the large carriers;they responded to the reduced volumes of air-travel demandby using smaller planes and drastically reducing the numberof operating planes.

(See RM continued)

A Newsletter from Student Chapter of INFORMS @ IMSE, USF

AlumniEditor’s Desk

V olu m e 2, Issue 1 S pring 2008

I nside t his iss ue:

O R a n d G e r r y m a n d e r i n g. . . . . . . . . . . . . . 2 G e n e r a t i o n E x p a n s i o n P l a n n i n g i n R e s t r u c t u r e d E l e c t r i c P o w e r m a r k e t s. . . . . . . 3

RM continued

We are now seeing that this is causing huge delays espe-cially for the network carriers. A number of point-to-point car-riers, most of which are not unionized, have now captured asignificant portion of the market. What remains to be seenhow RM systems adapt to these events.

By Abhijit Gosavi, Ph.D., Asst. Prof, ISE SUNY, Buffalo

News Feature

•

The Automation & Robotics lab will show different demos ofrobotic arms and automated machines.

•

Human Factors lab will introduce different topics like anthropome-try, ergonomics, safe design and time measurement.

•

Simulation lab will show different computational implementationsmodeling real life situations.These exhibitions will be presented by INFORMS chapter members.

You might think that the last place ORcan be employed is in politics and youwould be dead wrong. Take for instance,the following situation in US politics.For political purposes, each state in theUS is divided in congressional districts,and several officials are elected in thesedistricts. This is the case even in the primaries in somestates.. For instance, on the night of February 7 2008 inthe California Democratic Primary, the total amount ofvotes for each candidate at the state level did not matter asmuch as the votes each candidate obtained in each con-gressional district in California. This happens becausedelegates (or the people who really have the say in callingthe election for one of the candidates) are allocated propor-tionally according to districts.What happens if the way these districts are de-signed favors some political sector? Think on the followingscenario, consider three border congressional districts A-B-C and assume that they are located in that way from left toright in a map. Assume A and C are two times the size of Band they are 90% Republican. On the other hand, B issmall and with just a slight Democratic majority, say 52%against 48% republicans. If the populations in A and C bor-dering B are densely populated and 99% Republican,wouldn’t it be better for Republicans if the boundaries ofdistricts A and C were moved a little bit to the left and rightrespectively? It would certainly be better for them and maybe not for us.. With the new design the Republicans wouldbe majority in the three districts, as opposed to just two asit is in the original design and therefore they would getdelegates from the three districts. In my books, this ma-nipulation of boundaries for electoral advantage is bluntcheating, yet in political circles is called “gerrymandering.”Operations researchers have tackled this problemfor quite some time now and some papers date back to the1960’s. Obviously, the “fair and honest” operations re-searchers focused on how to design districts to effectivelyprevent the art of gerrymandering. The idea behind thisanti-gerrymandering strategy was to come up with a set ofhomogeneous regions with approximately the same sizeand compact. More recent papers have also added otherconstraints like socio-economic homogeneity.In addition to the challenges posed by finding theright problem formulation, i.e., a suitable objective functionand effective constraints, it is hard to find a convenient so-lution method given how rapidly the problem increases indimensionality. I checked a couple of papers and they usedgenetic algorithms and tabu search to solve the problem.I thought all this gerrymandering talk was actuallyout of date, but you never know when it would come back.After suffering several losses in the past general elections,last year some California Republicans tried to introduce aballot initiative awarding presidential electoral votes to thewinning candidate (of the general elections) in each of thestate’s congressional districts thereby changing the currentsystem in which the statewide winner gets California’s 55electoral votes. It seems that the initiative finally was notintroduced, but, as I wrote before, you never know when itwill come back and thereby when gerrymandering will be inthe limelight again.Who knows? You might end up being a politicalhack trying to devise the right geographical configuration tohelp some political party win elections in the future.

OR and Gerrymandering

USF- Engineering EXPO

Simulation of a warehouse using FLEXIM

Engineering EXPO is an open-house 2-day activity for elementary and middle school kids to get interested in engineer-ing. This year, the IMSE department will participate with the following three exhibitions:

Research Corner

Generation Expansion Planning in Restructured Electric Power Markets

According to the National Energy Policy(NEP) developed in 2001 and the AnnualEnergy Outlook 2007, energy demand inthe U.S. is slated to increase sharplyover the next two decades. It is stated inthe NEP that the United States will needabout 393,000 MW of new generatingcapacity by 2020 to meet this growing demand. Thisamounts to the construction of 1,300 to 1,900 new powerplants, averaging to about 60 to 90 plants a year, or morethan one a week. With about fifteen States in the U.S. cur-rently trading electricity in restructured markets (

markets with reduced governmental control

), a significant proportionof the aforementioned capacity expansion will have to takeplace in a market based environment. But, almost all of theresearch concerning capacity expansion has been con-ducted under the regulated market paradigm (aka, central-ized market control). As a result, authorities in severalcountries with restructured electricity markets have at-tempted to control decisions on generation investments,instead of leaving it to market forces, to avoid detrimentalimpacts of capacity shortages on society. Our researchintends to fill this vacuum by developing a comprehensivemethodology to obtain multi-period multi-generator equilib-rium capacity expansion strategies in restructured electric-ity markets.In this research, we will address the critical societalchallenge of determining

which type

where

, and at

what time

period

new generation capacities are likely to beadded to a power network by the competing generators inresponse to expected demand growth, changes in networkconditions, and market design incentives. This will be ac-complished by developing a comprehensive model and acomputational solution strategy considering major electricpower market features including multiple competing gen-erators, a multi-year planning horizon, transmission con-straints in electric power networks, construction lead times,demand variability, emission limits, system reliability, risk ofprofit volatilities, and market power. Our model has a multi-tier

game theoretic

construct that iteratively builds multi-year multi-player equilibrium expansion strategies for thegenerators. This will be accomplished by solving a numberof matrix games for each year of the planning horizon,where each generator determines his/her equilibrium ex-pansion plan from a set of feasible expansion actions, eachcomprising a choice of generation technology and capacity.Until late nineties, a significant number of papersappeared in the literature examining the generation expan-sion planning (GEP) process in regulated market places.These papers studied GEP as an optimization (cost minimi-zation) problem of a central planning authority. However, ina restructured market, the GEP problem must be viewed asmulti-player noncooperative profit maximization problemand its solution should be derived from the

equilibrium solu- tions

noncooperative games

. Our modeling approachaddresses this issue.

By Vishnu Nanduri, Ph.D. Candidate IMSE & Tapas K. Das , Associa-te Provost, and Profesor of Industrial EngineeringColumn solicited by Diana Prieto, Ph.D. student, IMSE