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Research Universities Advance Knowledge Of Business, Finance

A Wayne State University project is helping Southeast Michigan get a clearer picture of our economy. It’s called the Southeast Michigan Purchasing Managers Index, and it’s a great example of how research at URC member institutions supports business and finance in the state.

Researchers from Wayne State’s School of Business Administration’s Global Supply Chain Management program survey purchasing managers who are part of the Southeast Michigan Chapter of the Institute of Supply Management, as well as those who are part of the Automotive Industry Action Group. Then they compile the data into indices of economic growth such as production, employment, and commodity prices.

“Buyers are a good leading indicator of which way the economy is headed,” says Dr. Timothy Butler, professor of global supply chain management at WSU. “They have to be building up inventories to prepare for sales and they lead as demand is created.”

The index is used by media and by business planners, strategic planners, and tacticians as they determine what to expect from the economy in the short term. Butler stressed that the index is not pure academic research, but is a service to the business community. It’s one of many partnerships the School of Business Administration and the Global Supply Chain Management Program has built with companies.

“What we are doing is working with businesses to advance the knowledge of business and the supply chain and create learning,” Butler says.

Creating learning is also the goal of the Games for Entertainment and Learning Lab at Michigan State University. Housed in the College of Communication Arts and Sciences, the GEL Lab is an association of game research and design faculty and students at MSU. They do externally funded research and development work.

One such project was a game they developed for the MSU Federal Credit Union called Spartan Villa. The game is designed to teach financial literacy to college students. Similar to games like The Sims, players manage a college rental house and have to deal with budgeting, managing cash flow, and learning about credit. Doing the right things lets them add to their houses, get higher credit scores and even have parties.

“We did not want to make a game that was like a lecture or like a quiz,” says Brian Winn, co-director of the GEL Lab and an associate professor in the Department of Telecommunication, Information Studies, and Media. “We wanted it to be all experiential-based.” Because the game was intended to educate students about financial issues, they built in a very complex financial system, with savings accounts, checking accounts, mortgage interest rates and bills that need to be paid on time to avoid paying late fees. And they had to make sure it was something students would find fun and enjoy playing, so they used the concept of a college rental house to make it relatable and interesting to them.

“By virtue of play, people can experience the positives and negatives they would have in the real world, but do it in the safe environment of the game,” Winn says. “They are learning from experience versus being told to do something.”

He and his colleagues recruited students who had shown talent in class and hired them for the project. It gives them the chance to work on a project as they would in the real world, with a budget to meet and a client to please. They’ll have an impressive portfolio piece when they hit the job market, Winn says.
“It’s really hard to make a fun game, and to make a game fun that uses a learning objective,” Winn says.

And for his part, he enjoys working on funded projects such as this, where there is an end product for the world to enjoy, versus a pure research project that might end up on a library shelf rarely to see the light of day.

Making complex economic choices make sense in the real world is the focus of a recent study from Dr. Isak Duyenas of the University of Michigan Ross School of Business, along with co-authors Dr. Ozge Sahin of Johns Hopkins University’s Carey Business School and Ross PhD candidate Yao Cui. They approached the issue of secondary ticket markets – sites like StubHub – from a revenue management standpoint.

Contrary to popular belief, they found that secondary markets generally lead to greater revenue for event organizers. When people know they can resell their tickets freely, they are more likely to commit to purchasing tickets. If ticket prices are fixed and it’s unlikely they can resell, people are less likely to buy which means less revenue for event organizers.

“If the biggest fans buy tickets in advance but can’t resell them if something comes up and they can’t attend, they’ll be less likely to buy in advance or pay the same price again,” says Duenyas, the John Psarouthakis professor of manufacturing management and professor of operations and management science. “The fact that the secondary market exists actually makes it more likely that fans buy at any given price. Without a secondary market, event organizers would have to sell the tickets at a lower price to induce fans to purchase.”

The researchers advocate for a “ticket options” model. Rather than buying a seat outright and hope they will be able to resell it if they can’t attend the event, organizers would sell ticket options for a fraction of the price of the ticket. If the buyer chooses to attend the event, they would pony up the full ticket price. Otherwise, they can walk away, and the venue owner keeps what they paid for the option.

“There were some incidents of event managers selling more options than they had seats, which gave it a bad name,” Duenyas says. “But used correctly, it’s the better way for both venue and customer. These things take time.”