Operational Strategies for Distributing Durable Goods in the Base of the Pyramid
Bibliographic record
Abstract
Problem definition: Novel life-improving products, such as solar lanterns and energy-efficient cookstoves address essential needs of consumers in the base of the pyramid (BOP). However, their profitable distribution is often difficult because BOP customers are risk-averse, their ability to pay (ATP) is lower than their willingness to pay, and they face uncertainty regarding these products’ value. Academic/practical relevance: We examine two practical strategies from distributors in the BOP: (1) improving the product’s affordability through a discount and (2) increasing awareness of the product’s value. Our results identify BOP-specific operational trade-offs in implementing these strategies. We also propose strategies to manage these trade-offs that can increase consumer surplus in the BOP. Methodology: We introduce a supply chain model for the BOP and analyze the distributor’s pricing problem with refunds as well as the distributor’s optimal budget allocation between strategies (1) and (2). Results: We find that, in the BOP, the distributor’s profit-maximizing budget allocation often yields the lowest consumer surplus. This misalignment between profits and consumer surplus disappears if customers’ ATP is high. Moreover, the misalignment can be resolved if the distributor offers free product returns and commits to a maximum retail price. We confirm the robustness of our results through numerical simulations. Managerial implications: Best operations strategy practices in the BOP can differ significantly from developed markets. Furthermore, BOP customers’ limited ATP and high risk aversion generate a BOP-specific misalignment between profits and consumer surplus. Operational commitments, such as free returns, reduce this misalignment and can serve as a signal to investors of a social enterprise’s focus on consumer surplus.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.006 |
| Meta-epidemiology (narrow) | 0.001 | 0.001 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.001 | 0.002 |
| Scholarly communication | 0.003 | 0.004 |
| Open science | 0.002 | 0.003 |
| Research integrity | 0.002 | 0.001 |
| Insufficient payload (model declined to judge) | 0.009 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".