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Innovation and Practice in Industrial Engineering
and Managemennt (Volume 2)
Proceedings of the 22nd International Conference
on Industrial Engineering and Engineering
Management 2015
Ershi Qi Jiang Shen Runliang Dou
• •

Editors

Proceedings of the 22nd

International Conference
on Industrial Engineering
and Engineering
Management 2015
Innovation and Practice in Industrial
Engineering and Management (Volume 2)
Editors
Ershi Qi Runliang Dou
Chinese Industrial Engineering Institution, Chinese Industrial Engineering Institution,
CMES CMES
Tianjin University Tianjin University
Tianjin Tianjin
China China

Jiang Shen
Chinese Industrial Engineering Institution,
CMES
Tianjin University
Tianjin
China

ISBN 978-94-6239-176-5 ISBN 978-94-6239-177-2 (eBook)

DOI 10.2991/978-94-6239-177-2

Library of Congress Control Number: 2015960782

© Atlantis Press and the author(s) 2016

This book, or any parts thereof, may not be reproduced for commercial purposes in any form or by any
means, electronic or mechanical, including photocopying, recording or any information storage and
retrieval system known or to be invented, without prior permission from the Publisher.

Printed on acid-free paper

Preface

It is my great pleasure to welcome all the delegates come all the way for the
22nd International Conference on Industrial Engineering and Engineering
Management 2015 (IEEM 2015). It is their great efforts that bring out the pro-
ceedings of IEEM 2015 which records the new research findings and development
in the domain of IEEM. What is more excited, they are the experts or scholars with
significant achievements in the field. I believe that the proceedings will serve as the
guidebook for the potential development in IEEM and play a great role in pro-
moting the IEEM development.
With the ongoing dramatic paradigm shifts of industrial engineering theories and
applications, more and more enterprises have realized it is the key to innovate their
products by utilizing the advanced technology to enhance their core competitive-
ness. It is quite imperative to bring professionals form both academia and business
together to share their new findings and experience.
IEEM 2015 caters to the purpose by providing a platform to exchange the
state-of-the-art research, achievement exhibition, case study, and development in
the field of IEEM, as well as promoting its application. The papers selected all
center on the main themes of the conference: Industrial Engineering Theory,
Industrial Engineering Technology Practice, Information Technology Application
and Development, Automation System Theory and Application, Value
Engineering, as well as Engineering Management Method and Practice. All the
papers included in the proceedings have undergone rigid peer review. We have also
invited some prominent experts as our keynote speakers.
The conference is sponsored by Chinese Industrial Engineering Institution,
CMES, and organized by Guangdong University of Technology, China. We would
like to extend our sincerest thanks to Atlantis Press for their generous support in the
compilation of the proceedings. We also would like to extend sincerest thanks to
Guangdong University of Technology for holding such an excellent event, and to

v
vi Preface

all the delegates, keynote speakers, and the staff of the organization committee for
their contribution to the success of the conference in various ways.
Thank you very much!

October 2015 Ershi Qi

Jiang Shen
Runliang Dou
Contents

Part I Engineering Management

A Comparative Study on Retailer’s Refunding Strategies
Considering Products Advance Selling . . . . . . . . . . . . . . . . . . . . . . . . 3
Gang Wang, Zhao-chao Dong and Zhi-bao Li
Research on the Monopolist’ Repurchase and Remanufacture
Decisions Based on Heterogeneous Consumer Considering
Buy-Back Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Zhao-fang Mao, Xin-Xin Li and Wei Liu
Study on the Exchange Rate Risk of China International
Construction Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Quan Fan and Xing Bi
Technology Diffusion and Acquisition Premium in M&A . . . . . . . . . . 35
Rui-ye Wan and Hong Zeng
Coordinated Development Degree of County Socio-Economic
System Prediction Based on GA-SVM . . . . . . . . . . . . . . . . . . . . . . . . 45
Jing Zhao, Ying Wang and Xing-hua Dang
Quality Safety Risk Analysis on Children’s Car Safety Seat . . . . . . . . 53
Xia Liu, Qian Wu, He-liang Song and Ying Li
Coupling Relationship Analysis of Economic Growth
and Environmental Pollution in Western Region . . . . . . . . . . . . . . . . 63
Ling Lin, Qing-qing Cao and Zhong-li Zhou
The Dynamic Analysis of R&D Competition Behavior
of a Duopoly Under the Condition of Different Expectations . . . . . . . . 75
Dong-wei Huang, Yu-xia Fu and Shen-xin Yu

vii
viii Contents

Strategic Human Capital in Organization: Frontier Review,

Prospective Commentary, and Guiding Framework . . . . . . . . . . . . . . 85
Long Xu, Su-ying Gao, Lu Zhang, Hong-feng Zhang, Hui Yu
and Chun-ying Song
Research on the Effects of the Fixed Asset Investment
on the Nonperforming Loans Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Guo-yi Li and Jing Sui
Research on Real-Time Cost Control in Factory
in IT Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Yu-xiang Pan, Er-shi Qi and Dan An
Fuzzy Catastrophe Model of Project Selection Based on Strategy . . . . 117
Bao-long Wang, Cheng-long Wang and Yuan-tao Song
Synergistic Factor Analysis of Production-City Integration . . . . . . . . . 129
Shui-bin Jiang and Jiang Shen
Analysis of Industry-University-Research Cooperation
Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Xiao-yu Ye and Ying Shen
Application of TOPSIS Evaluation Method in the Cultivation
of Scientific and Technological Achievements . . . . . . . . . . . . . . . . . . . 145
Hui-ming Xu, Jing-hua Wang, Meng Zhang, Chun-jie Hou, Xi Chen
and Jian-fei Ji
A Study on Safety of Transportation System of Marine
Dangerous Chemicals Based on Energy Concept . . . . . . . . . . . . . . . . 159
Jian-min Li, Shao-zhen Song, Ya-lin Diao and Wei Guan
Empirical Study on Key Risk Factors of Project Bidding . . . . . . . . . . 171
Shu-qing Liu and Chun-hua Li
A Game Analysis of Quality Supervision Over Rural
Development Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
Fu-jiang Sun
Analysis on the Influence Factors of Construction Enterprise
Synergistic Development Based on the Ecological Perspective . . . . . . . 193
Chong Jia, Zhi-hong Wang and Dong-mei Feng
Study on the Extended Management Methods of Outsourcing
Research Projects of Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
Qian-long Yu, Lin Chen and Lei Sun
Evaluating Agricultural Catastrophe Risk in Guangdong Province . . . 207
Lei Xu
Contents ix

Research of Data Resource Description Method Oriented

Provenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
Yan-peng Zhao, Chao-fan Dai and Xiao-yu Zhang
Study on the Support System of Safety Hidden Hazards
Warning and Countermeasures for Main Ventilator
in Coal Mine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Xiao-yan Gong, Xin Gao and Yu-xuan Xue
Enterprise Service Bus Based on OSGi . . . . . . . . . . . . . . . . . . . . . . . 233
Wei Huang, Bao-cheng Sun, Ming-di Xu, Heng Zhao
and Ying-song Hu
Robust Design for Remanufacturing Logistics Network
Based on Stochastic Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . 247
Hui Zheng, Wei Zhang and Jun-yu Wang
Lateral Replenishment Strategy for Chain Supermarket Fresh
Agricultural Products Inventory Optimization . . . . . . . . . . . . . . . . . . 259
Guang-shu Xu, Z.L. Song, S.J. Piao, H.F. Zhang and X.W. Zhang

Part II Value Engineering

Study on the BP Neural Network Evaluation Model
of Employability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273
Pei-lin Chen, Wei Cheng and Ting-ting Fan
Study on the Application of Genetic Algorithm Based BP Neural
Network Model in Field of Cross Selling . . . . . . . . . . . . . . . . . . . . . . 283
Pei-lin Chen, Wei Cheng and Ting-ting Fan
The Design of Floating Magnetic Pendulum-Driven Robot
Fish Diving and Counterweight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295
Hong-xiu Zhu, Da-feng Zhu, Tie-lei Zhao, Zi-hang Gao, Ying-ying Zhong,
Ye He, Yong Wang, Jia-tong Liu and Li-jun Wang
College Students’ Life Satisfaction Evaluation Based
on Structural Equation Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303
Xiao-yan Gu and Xin-ru Pan
Research on Rural Infrastructure Project Management
of Baohe Village in Beijing of China . . . . . . . . . . . . . . . . . . . . . . . . . 311
Jun-qi Hou and Yun-jiao Duan
Owner Oriented Integration Management of Large General
Hospital Construction Projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317
Yu-cheng Pang and Li Shi
x Contents

Predicting Technical Communication Between Teams

in GPD Project Related Redesign Components . . . . . . . . . . . . . . . . . . 327
Sonia Kherbachi and Qing Yang
Research of Distribution Center Site Selection Based
on Fuzzy Analytic Hierarchy Process . . . . . . . . . . . . . . . . . . . . . . . . . 335
Yi-hong Cheng and San-yuan Zhou
Study on Innovation and Driving Mechanism of Internet Finance . . . . 343
Hu-bin Jin and Cheng-hu Zhang
Research on Cost Management of Real Estate Project
Construction Phase Based on Value Engineering:
The Observatory World Project of China State Construction
Property Company as an Example. . . . . . . . . . . . . . . . . . . . . . . . . . . 351
Huan-wu Yin, Hui-jiang Yang and Hui-jie Gao
Analysis on Cost Management Application of Value
Engineering at Design Phase of Real Estate Projects. . . . . . . . . . . . . . 361
Huan-wu Yin, Hui-jiang Yang and Hui-jie Gao
Research on Application of Value Engineering
in Optimization Design in the International EPC Project . . . . . . . . . . 373
Yan-fang He and Zi-cheng Tao
Application of Value Engineering in Urban Planning Practice—3
Cases at Different Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383
Jian-feng Xu, Yang Lu and Ling Huang
Research on the Key Factors of Urban Gas Repair Operation
Based on Analytic Hierarchy Process . . . . . . . . . . . . . . . . . . . . . . . . . 393
Xia-xi Li, Cui-mei Li, Qian Yan and Ya-hui Wang
The Efficiency of Supply Chain Technology Estimation
Model Based on Malmquist Productivity Parametric
Decomposition Approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401
Heng-shan Zong, Guo-zhu Jia and Yang Cheng
Research on the Optimization of Parts Processing System
Based on Queuing Theory and Value Engineering . . . . . . . . . . . . . . . 417
Ying-wei Cui and Hai-bo Li
An Attention-Based View of Internet Business Platform
Service Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427
Xue-qing Wang and Li-ming Chen
Integrated Planning with Value Engineering for Call Centers
Equipment and Workforce Capacity Expansions . . . . . . . . . . . . . . . . 437
Hong-xun Wang, Yi-bo Wang and Xiao Shang
Contents xi

An Introduction of Application of Value Engineering

in Beijing-Tianjin-Heibei Traffic Integration. . . . . . . . . . . . . . . . . . . . 451
Han-po Hou, Bei-bei Wang and Wei Yao
Improvement of the “Bottom-up” Approach in Value
Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461
Zhi-wei Jiang, Hua-yan Yu and Xue-song Wang
Development of Chinese Bonded Logistics Parks
and Tax Policy Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469
Suo-quan Zhang, Nian-qing Wang and Yan-jie Shu
The Layout Optimization Model and Algorithm
of Logistics Park Potential. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479
Guo-wen Ren and Ying-jie Huang
The Control and Application of the Overbooking
Strategy—Empirical Research on Air China . . . . . . . . . . . . . . . . . . . 489
Shou Li, Lun Li and Chen-xiao Zhao
The Impact of FDI on the Income and Income Gap
of Urban Residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495
Shuo Li and Lun Li
Study on the Strategies of Target Cost Management
in the Supply Chain of Aeronautic Complex Product . . . . . . . . . . . . . 501
Hang-hang Chen and Li-xin Pan
The Research About the Effect of Straw Resources
on the Economic Structure of Jilin Province. . . . . . . . . . . . . . . . . . . . 511
Wei-dong Xi, Yu-tao Sun, Guan-fang Yu and Ya-qing Zhang
Information Conflicts, Ambivalence, and the Judgment
of Nonprofessional Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519
Mao-ran Meng, Li-xin Pan and Ling-ling Tan
Research on Performance Evaluation of Tourism Management
Professionals Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531
Shan-shan Lv and Yan-zhang Gu
The Risk Assessment Method and Application of Aviation
Subcontract Base on Three-Dimensional Evaluation Model . . . . . . . . . 539
Si-jia Zhu and Xin Liu
Research on Constructing the Information Platform of Customs . . . . . 547
Ning Ding
Research on Cross-Border Trade e-Commerce Taxation—A Case
Study of the Diamond Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559
Ning Ding and Yan Wang
xii Contents

Research on Schedule Risk Management of Interdisciplinary

Complex Giant System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567
Jia Lei, Wan-hua Qiu, Chang-hong Ding and Wen-feng Yuan
Research on the Application of Internet Financial Integration
in China Ping An (Group) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573
Ji-qiu Xiao and Miao Yu
Study of Chinese Luxury Import Tax Revenue-Taking Luxury
Bags for Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581
Chang-hu Liu, Ming-lu Xu and An-qi Zhang
An Empirical Research on C2C Purchase Intention
Based on Mobile Social Networking Service . . . . . . . . . . . . . . . . . . . . 591
Guo-wen Ren and Dan-dan Yuan
Institutional Norms for Place Branding and Its Effect
on Corporate Involvement Behavior . . . . . . . . . . . . . . . . . . . . . . . . . 599
Wei-hong Zhao and Fan Zhang
Study on Influential Factors of Agricultural Eco-place Brand
Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 611
Wei-hong Zhao and Hui-long Zhang
Dimensions and Formation Mechanism of Customer-Based
Place Brand Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621
Wei-hong Zhao and Yu-dong Zhang
The Strategy of E-Commerce Platform Based on the Perspective
of Resource Orchestration: A Case Study of Haier . . . . . . . . . . . . . . . 629
Nan Yang, Tao-hua Ouyang, Jing-bo Hu and De-lin Zeng
Analysis on the Effect of Straw Resources in Jilin Province
Based on Multi-objective Programming . . . . . . . . . . . . . . . . . . . . . . . 639
Hong-jing Zhang, Ya-qing Zhang and Yu-tao Sun
Index Spot Futures Arbitrage Based on Contingent
Claim Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649
Chao Wang and Yi Cui
Effect Evaluation of the Whole Bidding Based on Analytic
Hierarchy Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661
Ying-wei Cui and Hui-min Li
Study on Extensional Evaluation of Excavation Engineering
Project Management Performance on OWA Operator . . . . . . . . . . . . 675
Hui Guang and Fei Ren
Contents xiii

A Brief Discussion on Blue Ocean Strategy of the Farm Product

Electronic Business Under the Booming O2O Pattern . . . . . . . . . . . . . 685
Jun Ma
Cost Control System Building Based on Government Investment
Construction Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695
Zhen-quan Wu, Fang Liu and Xiao-yun Xu
Preferential Mode of Import Tariff in Context of E-Commerce
Cross-Border Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 707
Shuo-quan Zhang, Ying-hui Xia and Yan-jie Shu
Application of SPSS in EIQ Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 717
Xiao-juan Yang and San-yuan Zhou
Research on Gray Fuzzy Risk Assessment in Water
Transportation of Dangerous Goods . . . . . . . . . . . . . . . . . . . . . . . . . 725
Xiao-li Zhao
Supplier Selection Decision-Making Model Based on Entropy
and Its Application in the Large Aircraft Project . . . . . . . . . . . . . . . . 733
Chang-hong Ding, Wen-feng Yuan, Meng Zhao and Wan-hua Qiu
Study of Fund Performance Evaluation Based on Insurance Costs . . . 743
Xin-an Fan
Entropy-Based ERP System Selection Model Study . . . . . . . . . . . . . . 751
Xiao-yan Gu and Meng-xiao Wang
Application of DEA in the Value Optimization Study of China
Listed Media Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761
Hui-chen Jiang and Shan-cun Liu
Research on Prediction of Transmission and Transformation
Project Cost Index Based on ARIMA and Exponential
Smoothing Models. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 771
Dong-xiao Niu and Fu-yu Hua
Analysis of Countermeasures Negotiation Process
Based on Resource Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781
Jian-fen Yan, Yong-gui Shi and Shi-meng Ma
Research on Enterprise Innovation Behavior and Model
of Regional Industry Cluster in Hebei Province . . . . . . . . . . . . . . . . . 791
Shi-meng Ma, Yong-gui Shi and Hai-xia Li
Research on the Current Situation and Innovation Mode
of Land Transfer in Hebei Province Under the Background
of “Internet +” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803
Hai-xia Li, Yong-gui Shi and Shi-meng Ma
xiv Contents

Corporate Ethics and Ethical Judgment of Earnings

Management—Psychological Safety as Mediator. . . . . . . . . . . . . . . . . 813
Xiao-xu Zhang
The Case-Based Reasoning Evaluating Model of Coal Resource
Mining Right with Unknown Attribute Strength Function. . . . . . . . . . 823
Shao-hui Zou, Yan-yan Yuan and Jin-suo Zhang
Research on the Effectiveness of Intellectual Capital in Driving
the Market Value of China Listed Companies—Taking
Communication and Other Related Equipment Industries
for Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833
Hui-chen Jiang and Shan-cun Liu
Practice and Innovation of Engineering Construction Project
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841
Ge-ping Wang, Zhen-quan Wu and Tao Wang
A Research on the Integrated Value Management of PPP Project
Based on Hall’s Three Dimensional Structure. . . . . . . . . . . . . . . . . . . 849
Guo-zong Zhang, Jin-hua Wang, Yong-hua Wang and Wan-hua Qiu
The Exploration of Project Management Enterprise Standard
to Enhance the Enterprise Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 859
Tao Wang, Ge-ping Wang, Su-ping Zhu and Ying-chun Zhu
Research and Application of Integrated Quality System
for Large-Scale Complex Equipment Manufacturing . . . . . . . . . . . . . 871
Cheng Li
Research on High-End Manufacturing Innovation
and Development Way Based on Cloud Computing . . . . . . . . . . . . . . 881
You-cheng Shan, Chao Lv, Qiu-ye Zhang and Xin-yu Tian
 Part I
Engineering Management
A Comparative Study on Retailer’s
Refunding Strategies Considering
Products Advance Selling

Gang Wang, Zhao-chao Dong and Zhi-bao Li

Abstract Advance selling through pre-orders is a strategy to transfer inventory risk

from a retailer to consumers. Refunding strategy can reduce strategic consumers’
pre-order risk caused by valuation uncertainty so as to encourage pre-orders.
A newsvendor retailer can have three refunding strategies to choose from: no
refunding allowed, partial refunding and full refunding. This research studies how a
retailer could design a refunding strategy in the advance selling problem to maxi-
mize her own profits. We find some interesting results. For example, compared with
no refunding allowed strategy, customers in partial refunding strategy can bear
higher advance selling price, which has a positive effect on the retailer’s profit. In
full refunding strategy, more customers will return and the margin profit earned
from these customers will be lower than that in partial refunding strategy, leading to
lower profit in full refunding strategy.

Keywords Advance selling
Refunding strategy
Strategic consumers

1 Introduction

Consumers become more and more rational with the aggravation of the market
competition and the convenient access to market information. Even if evaluation is
above current selling price, strategic consumers will not place order immediately
but to compare the utility of buying products at different stages and then decide the
best time to buy [1]. This waiting behavior has negative effects on the retailer’s
pricing and inventory decisions [2, 3]. Therefore, it’s necessary to consider
consumers’ strategic behavior when optimizing the retailer’s pricing and ordering
decision.

G. Wang
Z. Dong (&)
Z. Li

College of Management and Economics, Tianjin University, Tianjin, China
e-mail: 18601180315@163.com

© Atlantis Press and the author(s) 2016 3

E. Qi et al. (eds.), Proceedings of the 22nd International Conference
on Industrial Engineering and Engineering Management 2015,
DOI 10.2991/978-94-6239-177-2_1
4 G. Wang et al.

Advance selling allows consumers to pre-order before the release of the prod-
ucts. Reference [4] mentioned an advance selling case that a pastry shop encour-
aged consumers to pre-order moon cakes a month before the Mid-Autumn Festival.
Subscribers can enjoy 25 % off and would get moon cakes one week before the
Mid-Autumn Festival. Microsoft allowed consumers to advance purchase in the
Amazon before the formal release of Vista [5]. Advance selling strategy is usually
used in the newsvendor model where sales cycle is short and market demand is
uncertain. Advance selling can transfer inventory risk from the retailer to consumers
to some extent [6]. In addition, the retailer can use the advance selling information
to update the sales information prediction in spot selling period, making it more
close to the actual market demand.
Among literatures on advance selling problem considering the consumer
strategy behavior, [7] proved that advance selling strategy can be applied as long
as consumer value uncertainty exists. Reference [8] expanded [7]’s research and
showed that pre-sale profit comes from the expansion of market demand.
Reference [6] discussed the advantages and disadvantages of pre-sale from the
angle of risk preference and proved that pre-sale strategy is beneficial for the
retailer only if the difference between consumers’ valuation when participating
pre-sale and not participating pre-sale reaches a critical value. Reference [5]
divided advance selling strategies into no advance selling allowed, moderate
advance selling and deep advance selling for pre-orders. Some literatures [6, 7]
mentioned refunding strategy in extension section, but there is no meticulous
research on refunding strategy.
There are two types of refunding strategies: full refunding and partial refunding.
In real life, full refunding is more common, but many businesses still apply partial
refunding policy by charging some returning fee. In this way, consumers and
businesses will undertake the cost caused by mismatching of supply and demand
together [9]. Whether to full refund or partial refund does not only affect con-
sumers’ buying behavior, but also has influence on the retailer’s advance selling
strategy. For example, when committing full refund policy to consumers, retailers
can’t charge premium advance selling price, otherwise there will be speculation.
But in the partial refunding strategy, there isn’t this restriction. Therefore, it is
necessary to analyze full refunding strategy and partial refunding strategy
respectively.
We focus on seeking the retailer’s optimal refunding strategy under the con-
straints that consumers’ valuation and market demand are both uncertain and find
answers to the following questions: is refunding strategy profitable or not? If yes,
should the retailer apply full refunding strategy or partial refunding strategy? What
should the advance selling price and refunding price be? What is the optimal order
quantity?
A Comparative Study on Retailer’s Refunding Strategies … 5

2 Problem Settings

2.1 Assumptions

1. Consumers are classified into two segments depending on whether or not they
concern about the advance selling information. Consumers who concern about
the advance selling information are denoted as type I consumers and consumers
who don’t concern about the advance selling information are denoted as type U
consumers.
2. The advance selling period exists before the spot selling period starts. The
retailer allows consumers to place pre-orders during the advance selling period.
These orders are fulfilled at the beginning of the selling season by exchanging
pre-sale coupons.
3. All type I consumers arrive at advance selling period and all type U consumers
arrive at spot selling period.
4. Consumers’ valuation function and market demand function are known to the
retailer.
5. There exist no consumers who neither exchange nor return pre-sale coupons.
6. We do not consider consumer speculation.
7. Consumers are homogeneous and have the same valuation function.

2.2 Notation

Table 1 is the notation of all parameters used in this paper.

2.3 Decision Making Process

1. The retailer makes optimal pricing and ordering decisions to maximize her profit
under the premise that consumers are willing to pay the pre-sale price.
2. Consumers who arrive at advance selling period have two options: one is to buy
pre-sale coupons and exchange for real goods (or return coupons) in spot selling
period and the alternative is to wait until the spot selling period.
3. Consumers who arrive at the spot selling period should decide whether to buy or
leave.
6 G. Wang et al.

Table 1 Notation
Ni Number of type I consumers, a random variable with a normal distribution
Ni  N ðli ; ri Þ
Nu Number of type U consumers, a random variable with a normal distribution
Nu  N ðlu ; ru Þ
ρ Correlation coefficient between Ni and Nu
V Consumer valuation for a product, a random variable with an uniform distribution
V  U (μv, σv). V’s cumulative distribution function is F(V) with upper limit h and lower
limit l
Na Number of consumers who place pre-orders in the advance selling period, a random
variable with mean μa and standard deviation σa
Ns Number of consumers who purchase in the spot selling season, a random variable with
mean μs and standard deviation σs
pia The advance selling price in strategy i, i ∊ {1, 2, 3}. The optimal advance selling price is
denoted as pia . Strategy 1–3 represents no refunding strategy, partial refunding strategy
and full refunding strategy, respectively
pb The refunding price in partial refunding strategy, pb \p2 a . The optimal refunding price is
denoted as p*b
ps Spot selling price per unit of product in spot selling period
Uia Expected utility of a consumer when advance purchasing in strategy i, i ∊ {1, 2, 3}
Uis Expected utility of a consumer when buying in spot selling period in strategy i, i ∊ {1, 2, 3}
πia The retailer’s expected profit of advance selling period in strategy i, i ∊ {1, 2, 3}. The
optimal advance selling profit is denoted as pi a
πis The retailer’s expected profit of spot selling period in strategy i, i ∊ {1, 2, 3}. The optimal
selling profit is denoted as pis
nia The actual sales amount in advance selling period in strategy i, i ∊ {1, 2, 3}
Qi The retailer’s order quantity for spot selling period in strategy i, i ∊ {1, 2, 3}. The optimal
order quantity is denoted as Qi*
c The retailer’s ordering cost per unit of product
η Out of stock rate in spot selling period
s Salvage price per unit of product unsold at the end of the spot selling period

3 Three Types of Refunding Strategies for a Retailer

In this section, the retailer’s optimal profits are provided under each of the fol-
lowing strategies: no refunding strategy, partial refunding strategy and full
refunding strategy. These three strategies are equivalent to strategy 1, strategy 2 and
strategy 3, respectively.

3.1 Strategy 1: No Refunding Strategy

In advance selling period, consumers’ valuation for the products is not certain for
they haven’t seen the real products to be released. Therefore, consumers estimate
A Comparative Study on Retailer’s Refunding Strategies … 7

the utility of advance purchase based on expected valuation. The expected utility of
advance purchase is expressed as

Zh
Ua1 ¼ ðv  p1a Þ f ðvÞdv ¼ lv p1a : ð1Þ
l

In spot selling period, consumers have confirmed their valuation of the products
and will choose to purchase if the valuation is higher than the sale price, otherwise
they will leave the market. The expected utility of waiting until spot selling period
is expressed as

Zh
Us1 ¼ Emax½ð1  gÞðv  ps Þ; 0 ¼ ð1  gÞ ðv  ps Þ f ðvÞdv: ð2Þ
ps

A consumer places a pre-order if Ua1  Us1 and Ua1  0, from which we can derive
that

Zh
p1a  lv  ð1  gÞ ðv  ps Þ f ðvÞdv: ð3Þ
ps

Rh
According to (3), p1a cannot be larger than lv  ð1  gÞ ps ðv  ps Þ f ðvÞdv in
order to attract type I consumers to buy early. Since the retailer’s objective is to
maximize total profits, she sets

Zh
a ¼ lv  ð1  gÞ
p1 ðv  ps Þ f ðvÞdv: ð4Þ
ps

We assume that consumers are homogeneous, so the same type of consumers

have consistent decision making. Under optimal advance selling price p1
a , all type I
consumers will choose to advance buy. That’s to say Na ¼ Ni . The retailer’s
expected optimal profit of advance selling period is given as

Zh
p1
a ¼ ½lv  ð1  gÞ ðv  ps Þ f ðvÞdv  cli : ð5Þ
p2

The market demand for the spot selling period is given as Ns ¼ Fðps ÞNu where
Nu  Nðlu ; ru Þ, from which we can derive that Ns  Nðls ; rs Þ where ls ¼ Fðps Þlu ,
rs ¼ Fðps Þru . The retailer will update the market demand forecast for the spot
8 G. Wang et al.

selling period [4]. It is well known [10] that the distribution of Ns1 given Na1 [i.e.
(Ns1 jNa1 ¼ n1a )] is normal with mean l1s and standard deviation r1s , where
rs
l1s ¼ ls þ qðn1a  l1a Þ
r1a
ð6Þ
Fðps Þru
¼ Fðps Þlu þ qðn1a  li Þ ;
ri
qffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi pffiffiffiffiffiffiffiffiffiffiffiffiffi
r1s ¼ rs 1  ½corrðNa1 ; Ns1 Þ2 ¼ Fðps Þru 1  q2 : ð7Þ

The retailer’s optimal profit in sale period is given as

p1
s ¼ max ENs1 jNa1 ¼n1a ½ps minfNs ; Q g þ s maxfðQ  Ns Þ; 0g  cQ :
1 1 1 1 1
ð8Þ

This is a traditional newsvendor problem with normally distributed demand. It is

well known [4] that the optimal order quantity and optimal expected profit are
given as

Fðp2 Þru pffiffiffiffiffiffiffiffiffiffiffiffiffi

Q1 ¼ l1s þ kr1s ¼ Fðps Þlu þ qðn1a  li Þ þ kFðps Þru 1  q2 ; ð9Þ
ri
pffiffiffiffiffiffiffiffiffiffiffiffiffi
p1
s ¼ ðps  cÞFðps Þlu  ðps  sÞuðkÞFðps Þru 1  q2 ; ð10Þ

where k ¼ U1 ðppss c

sÞ and Uð:Þ, uð:Þ are the cumulative and density distribution
functions of the standard normal distribution, respectively. The out of stock rate in
spot selling period is given as g ¼ ppss c
s.

3.2 Strategy 2: Partial Refunding Strategy

If the refunding price is lower than the lower limit of consumers’ valuation (pb  l),
no one will return coupons which is the same with the no refunding allowed
situation. When the refunding price is higher than the lower limit of consumers’
valuation (pb [ l), consumers will choose to return coupons and get the compen-
sation price pb if v2½l; pb  and exchange for real goods with coupons if v 2 ½pb ; h.
A consumer’s expected utility when advance purchasing is given as

Zpb Z h
Ua2 ¼ ðpb  p2a Þ f ðvÞdv þ ðv  p2a Þ f ðvÞdv
pb
l ð11Þ
Z pb Z h
¼ pb f ðvÞdv þ v f ðvÞdv  p2a :
l pb
A Comparative Study on Retailer’s Refunding Strategies … 9

The expected utility of waiting is given as

Zh
Us2 ¼ Emax½ð1  gÞðv  ps Þ; 0 ¼ ð1  gÞ ðv  ps Þ f ðvÞdv: ð12Þ
ps

A consumer places a pre-order if Ua2  Us2 and Ua2  0, from which we can derive
that

Zpb Zh Zh
p2a  pb f ðvÞdv þ v f ðvÞdv  ð1  gÞ ðv  ps Þ f ðvÞdv: ð13Þ
l pb ps

Rp Rh
According to (13), p2a cannot be larger than l b pb f ðvÞdv þ pb v f ðvÞdv 
Rh
ð1  gÞ ps ðv  ps Þ f ðvÞdv in order to attract type I consumers to buy early. Since
the retailer’s objective is to maximize total profits, she sets

Zpb Zh Zh
p2
a ¼ pb f ðvÞdv þ v f ðvÞdv  ð1  gÞ ðv  ps Þ f ðvÞdv: ð14Þ
l pb ps

The retailer’s expected profit of advance selling period is expressed as

p2a ¼ ½ðp2
a  cÞFðpb Þ þ ðpa  pb ÞFðpb Þli :
2
ð15Þ

Proposition 1 In partial refunding strategy, the optimal refunding price equals the
retailer’s order cost per unit of product, which can be expressed as pb ¼ c (c [ l).
Proofs of Proposition 1 To obtain the optimal refunding price, we first take the first
derivative of p2a with respect to

@p2a @½p2
a þ ðc  pb ÞFðpb Þ  cli
pb : ¼ ; ð16Þ
@pb @pb

where
R pb Rh
@p2 @½h þ h FðvÞdv  ð1  gÞ ps ðv  ps Þf ðvÞdv
a
¼ ¼ Fðpb Þ: ð17Þ
@pb @pb
10 G. Wang et al.

Combining (16) and (17), we have

@p2a
¼ ðc  pb Þf ðpb Þli : ð18Þ
@pb

Then, in order to prove concavity, take the second derivative of p2a with respect
to pb :

@ 2 p2a l
¼ ½f ðpb Þ þ ðc  pb Þf 0 ðpb Þli ¼  i \0: ð19Þ
@ 2 pb hl

Form (19), we can demonstrate that p2a is the concave function of pb . Solving the
@p2a
@pb ¼ 0 gives pb ¼ c where pb represents the optimal refunding price.

Proposition 2 Partial refund strategy is better than no refunding strategy.

Proofs of Proposition 2 By substituting pb in (16) with the optimal solution pb ¼ c
got from Proposition 1, we have

Zc Zh Zh
p2
a ¼ cf ðvÞdv þ vf ðvÞdv  ð1  gÞ ðv  ps Þ f ðvÞdv: ð20Þ
l c ps

Then substituting pb in (17) with pb ¼ c gives

p2
a ¼ ½ðpa  cÞFðcÞ þ ðpa  cÞFðcÞla ¼ ðpa  cÞli
2 2 2
ð21Þ

Recalling that the optimal profit of the advance selling period in the no refunding
a ¼ ðpa  cÞli , we can easily see that the only difference between the
strategy is p1 1

profits of the no refunding and partial Rrefunding strategies

Rc is the optimal advance
c
selling price. Obviously, p2a  p 1
a ¼ l cf ðvÞdv l vf ðvÞdv  0, from which we
can easily derive that pa  pa . Therefore, partial refund strategy is better than no
2 1

refund strategy.
The reason for Proposition 3 is that, compared with no refunding strategy, partial
refunding strategy can reduce consumers’ risk in advance purchase caused by
valuation uncertainty. So in partial refunding strategy, consumers can bear higher
advance selling price, which directly improves the retailer’s profit.

3.3 Strategy 3: Full Refunding Strategy

In full refunding strategy, the refunding price is the same with the advance selling
price p3a . In this case, we must guarantee that p3a is no more than the spot selling
A Comparative Study on Retailer’s Refunding Strategies … 11

price ps (p3a  ps ). That’s to say premium pre-sale in this case is not allowed. That’s
because when premium pre-sale occurs in full refund strategy, which means the
refunding price is higher than the spot selling price, all consumers who advance
purchase will return pre-sale coupons and wait to spot buy with a lower price,
which is apparently harmful to the retailer. In the full refunding strategy, all con-
sumers who arrive at the advance selling period will advance purchase. At the end
of the advance selling period, consumers whose valuation is lower than the
refunding price p3a will choose to return. The expected returning rate is given as
Fðp3a Þ.
The retailer’s expected profit of the advance selling period is expressed as

p3a ¼ ðp3a  p3a ÞFðp3a Þli þ ðp3a  cÞFðp3a Þli ¼ ðp3a  cÞFðp3a Þli ð22Þ

Proposition 3 In the full refund strategy, the optimal buy back price isthe mini-
mum of h þ2 c and Ps which can be expressed as p3 a = min
hþc
2 ; ps
a [ maxfc; lg).
(p3
Proofs of Proposition 3 To prove concavity, take the first and second derivative of
p3a with respect to p3a :

@p3a h þ c  2p3a
¼ ½1  Fðp 3
Þ  ðp 3
 cÞf ðp 3
Þl ¼ li ; ð23Þ
@p3a a a a i
hl

@ 2 p3a 2
¼ l \0: ð24Þ
@ 2 p3a hl i

From (24), we can see that p3a is a concave function of p3a . Solving the equation
@p3a
@p3a¼ 0, we have p3a ¼ h þ2 c. Recalling above constraint p3a  ps , we can conclude that
the optimalh þadvance  selling price in full refunding strategy should satisfy that
p3
a = min 2
c
; p s . Besides, we know that p 3
a should be larger than the lower limit
of consumers’ valuation (p3a  l), otherwise, no one will choose to return. To
guarantee that the retailer has positive profit, we set p3a [ c. Therefore, the con-
straint for optimal advance selling price should be p3 a [ maxfc; lg.

Proposition 4 Partial refunding strategy is better than full refunding strategy.

Proofs of Proposition 4 We denoted the difference profits of partial refunding
a  pa , where pa ¼ ðpa  cÞli
strategy and full refunding strategy as Dp ¼ p2 3 2 2

and pa ¼ ðpa  cÞFðpa Þli .

3 3 3
hþc h þ c @Dp
a ¼ minf 2 ; ps g ¼ 2 , @c given c ¼ 0 will be expressed as
Case 1: If p3
12 G. Wang et al.

Zl Zh
@Dp 1 1 1 h
j ¼ li ½ dv  1  ðv  ps Þ dv þ ;
@c c¼0 hl ðps  sÞ hl 2ðh  lÞ
0 ps

Rh
where 1
ðps sÞ ps ðv  ps Þ hl
1
dv¼ 12 ðh  ps Þ2 . After some algebra, the expressions for
@Dp
@c at two endpoints of c can be given as

@Dp 1 l ðh  ps Þ2
jc¼0 ¼ li ½   \0; ð25Þ
@c 2 2ðh  lÞ 2

@Dp ðh  lÞ þ ðps  lÞ ðh  ps Þ2
jc¼ps ¼ li ½ 1 \0: ð26Þ
@c 2ðh  lÞ 2

Taking the second derivative of Dp with respect to c, we have

@ 2 Dp 1 1 1 1 1
¼ li ½f ðcÞ   ¼ li ½   ¼ li ½ ðpffiffiffi  1Þ: ð27Þ
@2c 2 hl 2 2 3rv

Given that @@ 2Dp @Dp

2
c is a constant, we can tell @c is a monotonic function of c. Also,
from (25) and (26), we know the values of @Dp @c at the two endpoints of c are both
@Dp
less than zero, so we can say @c \0 stands for any c 2 ½0; ps . Therefore, Dp is a
decreasing function of c. When c = ps

Zc Zh Zh
p2
a ¼ cf ðvÞdv þ vf ðvÞdv  ðv  ps Þ f ðvÞdv ¼ c;
l c ps

h þ c 
p3 2 ; ps ¼ c; pa ¼ pa ¼ 0 so Dpjc¼ps ¼ 0.
2 3
a = min In conclusion,
Dp ¼ pa  pa  0, and Dp ¼ 0 only when c = ps.
2 3

hþc @p3
a ¼ minf 2 ; ps g ¼ ps , @c ¼ ð1Þli hl . Taking the first and
hps
Case 2: If p3 a

second derivatives of Dp with respect to c respectively gives

@Dp ðh  ps Þ2
jc¼ps ¼ li ½ \0; ð28Þ
@c 2

@ 2 Dp
¼ li f ðcÞ [ 0: ð29Þ
@c2

From (29), we know that @Dp @Dp

@c is an increasing function of c, then @c \0 stands
for any c 2 ½0; ps  given (28). Therefore Dp is a decreasing function of c. ∵
Dpjc¼ps ¼ 0, ∴ Dp ¼ p2a  pa  0 stands for any c 2 ½0; ps  and Dp ¼ 0 only when
3

c ¼ ps .
A Comparative Study on Retailer’s Refunding Strategies … 13

Combining Case 1 and Case 2, we have Dp ¼ p2 a  pa  0 which shows that

3

partial refunding strategy is better than full refunding strategy.

The refunding price in full refunding strategy is higher than that in partial
refunding strategy. Increased refunding price has negative effects on the retailer’s
profit from two aspects. One is that the number of consumers who return coupons
will increase and the other is that the retailer’s marginal profit gained from those
who return coupons will decrease.

4 Conclusions

We assume that market demand is stochastic and consumers’ valuation follows

normal distribution. We divide all consumers into two categories according to
whether they concern about advance selling information or not. We analyze three
refunding strategies of a retailer-no refunding, partial refunding strategy and full
refunding strategy-applied in the two-period advance selling problem separately
and draw some interesting conclusions. We prove that partial refunding strategy
excels no refunding strategy for partial refund policy can reduce the risk of advance
purchase so that consumers can bear higher pre-sale price. But the refunding price
should be lower than the advance selling price. That’s to say the retailer’s profit in
partial refunding strategy is higher than that in full refunding strategy. The reason is
that full refunding policy will lead to higher returning rate and lower margin profit
gained from consumers who return, which will definitely damage the retailer’s
profit. Besides, from the numerical analysis section, we can see that premium
pre-sale may occur when consumers’ valuation is large enough in both no refunding
strategy and partial refunding strategy. But in full refunding strategy, advance
selling price must be lower than spot selling price, which has a negative effect on
the retailer’s profit.

References

1. Xiao-feng Liu, Pei Huang, “A study on dynamic pricing mechanism of perishable goods and
consumer’s strategic behavior,” Ph.D. dissertation, Business Management, Shanghai Jiao
Tong University, Shanghai, China, 2007.
2. Xiao-feng Liu, Pei Huang, “Optimal dynamic pricing and invenroty policy under strategic
customers,”.Journal of Management Science in China, vol. 12, no. 5, pp. 18-26, 2009.
3. Hui Yang, Jing Zhou, Hua-ming Song, “A dynamic pricing model with strategic and myopic
consumers,”Journal of Industrial Engineering/Engineering Management, vol. 24, no. 4,
pp. 133-137, 2010.
4. Christopher S Tang, Kumar Rajaram, Aydin Alptekinoglu,Ji-hong Ou, “The benefit of
advance booking discount program: model and analysis,” Management Science, vol. 50, no.4,
pp. 465-478, 2004
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5. Xu-ying Zhao, Kathryn E Stecke, “Pre-orders for new to-be-released products considering
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pp.123-135.
Research on the Monopolist’ Repurchase
and Remanufacture Decisions Based
on Heterogeneous Consumer Considering
Buy-Back Cost

Zhao-fang Mao, Xin-Xin Li and Wei Liu

Abstract This paper explores the repurchase and remanufacture decision of the
monopolist who produce a durable product that can be used for two periods. It turns
out that the remanufacture decision is profitable only when the production cost,
consumers’ opinion on the remanufactured product subject to some conditions. And
the revenue under remanufacture decision is increasing as the cost of new product
increases. We also find that, it brings market volume increase effect instead of can-
nibalization, which makes the remanufacture behavior beneficial to the monopolist.

Keywords Cannibalization
Durable product
Remanufacture
Repurchase cost

1 Introduction

For a long time, remanufacturing has been popular globally. Because in some way it is
beneficial to reducing the natural resource usage and alleviate the environment bur-
den. It is estimated that the total annual sales in the US is $53 billion in 1997, covering
more than 72,000 remanufacturing firms. Also some famous companies, such as
BMW, IBM, DEC et al. have already proved that remanufacturing is profitable.
However, it is difficult to make the remanufacture decision for the insufficiency
of guidance that the managers can follow. All the mangers seem afraid that the
remanufactured product may bring the cannibalization effect since those product
has the similar or the same function as the new product. “Under which conditions
will the remanufacture decision brings more benefit than the cannibalization
effect?” More management acknowledges are needed for those managers to make
differentiated and effective remanufacturing decisions.
Therefore, the goal of this paper is to provide some useful guidance for the
manufacturer to make remanufacturing decisions. We will explore profitable con-
ditions for the repurchase and remanufacture decision by taking the following factors

Z. Mao
X.-X. Li (&)
W. Liu

College of Management and Economics, Tianjin University, Tianjin 300072, China
e-mail: tjuxinxin@163.com

© Atlantis Press and the author(s) 2016 15

E. Qi et al. (eds.), Proceedings of the 22nd International Conference
on Industrial Engineering and Engineering Management 2015,
DOI 10.2991/978-94-6239-177-2_2
16 Z. Mao et al.

into consideration: (1) The cost of remanufactured product is lower than the new
product. (2) Remanufactured product usually have lower valuation from the con-
sumers. (3) The repurchased price of the used product is a decision variable, which
will have an impact on the supply of the remanufactured product in the second period.
There have been extensive researches on the remanufactured product. One of the
most important direction is that the probability of the remanufacturing. Ayres and
Ferrer [1] evaluates the economics of remanufacturing and points out some prob-
lematic issues specific to remanufacturing that have a substantial impact on prof-
itability. Ferrer and Ayres [2] analyzes the macroeconomic impact of remanufacturing
and confirm the intuition that it promotes demand for labor and reduces the con-
sumption of raw materials. DeboL and Van Wassenhove [3] makes research on the
pricing strategy and combined technology choice of the remanufactured product and
new product. Ferguson and Toktay [4] analyzes the remanufacture decision of the
monopolist when there is a third party that is remanufacturing. Heese et al. [5] explores
the effect of the remanufacture decision on the revenue. Guide and Li [6] points out
that the heterogeneity of the consumers makes a great difference to the monopolist’s
remanufacture decision. Another important stream is about studies on the pricing
decisions of the monopolist. Ding et al. [7] studies the pricing decision of the
monopolist under different market share from the perspective of the consumer. Liu
and Tan [8] studies the remanufacturing strategy for monopolist based on the con-
sumers’ type. Other related paper includes [9–13].
However, by summarizing the papers mentioned, it can be concluded that the
buy-back cost of used product from the consumer is not taken into the model as a
decision variable. In their model, they regard the volume of returned product as a
given variable, which has nothing to do with the buy-back price. However, in reality,
the volume of the returned products is greatly impacted by the price of the monopolist
announced. So in this paper, the writer try to answer whether the remanufacture
decision is still profitable when the buy-back cost is regarded as a decision variable.
And how the best solution changes when the given variables changes.

2 Assumptions and Consumer Utility Analyse

2.1 Summary of Nominations

The nominations in the paper is summarized as Table 1.

2.2 Model Assumptions

Assuming that the monopolist manufactures a durable product, which can be used
for two periods. Consumers who purchases the product in the first period can
choose to sell the used product to the monopolist or remain it to the second period.
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Dorothea gave him an eager glance, trying to read further.

Did he really feel no more than he showed? At the same
moment Mervyn and Dolly swept past again, nearer and
more slowly than before. Dolly lifted her blue eyes, and
gazed full at Dorothea, with a heart-sick reproachful gaze.
Dorothea was startled, even confounded, by it. The look
was such as she might have received from one whom she
had deeply injured. But how could she have injured Dolly?
Was she not studiously keeping aloof from Mervyn, for
Dolly's sake, forbearing to give him a needless smile?

Edred seemed not to have noticed the little interlude. He

went on without a break: "If one wanted mere prettiness,
and nothing more—"

"Oh!" cried Dorothea indignantly. "You don't mean Dolly!

You are not speaking of Dolly!"

Edred made no answer. Dorothea was hurrying forward,

under the strength of her own feelings.

"You have known her so many years, and I only two days,—
but to think of accusing Dolly of mere prettiness! You can't
know Dolly really. You can't have seen her in her home,
with her father and mother and her sisters. And I fancied
that you—"

Dorothea paused, and Edred's usually impassive face was

aglow. "Thanks," he said abruptly. "Yes, I—I think I do know
her. Forget what I said just now," and his voice showed
agitation. "Forget everything, except that she—that no one
in the world can ever be to me what Dolly is."
"I thought so," murmured Dorothea. "But why—?"

"Why do I not seek her? What is the use? Cannot you see
for yourself. Have I a grain of hope to work upon?"

Dorothea could not say that he had. She could only say,—"If
I were a man, I would not give in so easily."

"If you were a man, I suppose you would do as a man

does," he observed drily. "I don't know what has made me
say so much to you, Miss Tracy. Pray consider it to be
strictly in confidence—and pray forget the whole."

"I shall not forget; and I shall not repeat it," said Dorothea.
"But I still think that if I were you, I would try to win her."

Both Dorothea and Edred were too deeply interested in their

subject to pay much attention to what went on around.
Edred's eyes were bent downward, and Dorothea's were
occupied in studying him. They were skating round a tiny
islet which lay at one end of the pond, carelessly keeping to
the left of the narrow ice-belt, and calmly oblivious of the
fact that other people might choose to round the islet from
the opposite direction.

"Hallo!" A warning shout from Mervyn recalled their

wandering minds to the present. But the shout came too
late. Mervyn and Dolly, skimming lightly one way, met
Edred and Dorothea in full career. The four went down
together, and Dolly was underneath.

The two young men were up instantly; and almost before

Dorothea knew what had happened, she found herself again
on her feet, helped up by Mervyn's strong hands. Dolly
alone lay white and still on the hard ice.
"You are not hurt? You are sure you are not hurt?" Mervyn
was saying anxiously to Dorothea, while Edred was
endeavouring to lift Dolly. "You are quite sure?"

A keen throb of joy passed through Dorothea. She could not

but see that Mervyn's first thought was of her; his chief
solicitude was for her. Then she thrust the joy fiercely aside.

"O no, no; not in the least. But Dolly,—poor Dolly! Don't
think of me! Only think of Dolly," she implored.

CHAPTER XX
CUTTING THE KNOT

NEARLY ten days had gone by, and nothing would induce
Colonel Tracy to prolong his stay at the Woodlands. He
enjoyed being there immensely, he avowed; and the old
reconciled comrades were well-nigh inseparable.
Nevertheless, the Colonel confessed to Dorothea a private
craving for his town-life, his quiet room, his solitary candle
and musty books. He "wasn't made to live in a crowd," he
said. Dorothea could not echo his sentiments, but she
acquiesced.

Edred had prolonged his stay at the Park, and Mervyn was
there still, instead of taking flight with his usual speed. Both
brothers now, however, talked of leaving: Edred at the same
time as the Tracys—Mervyn a day or two later.

For more than a week, ever since the skating, Dolly had
been upstairs, invisible. Her poor little bruised face was at
first in no state to be seen: and also, she had been too
unwell to leave her room. The shock of her fall had perhaps
only given a finishing stroke to long previous strain. From
one cause or another, she was thoroughly weak and low,
disposed to tears on the slightest pretext, and unable to
rally.

Dorothea had had no easy part to play. She found herself

very much in request with both brothers: with Mervyn
plainly for her own sake; with Edred as plainly for Dolly's
sake. Edred liked to get Dorothea alone, and to hear her
talk about Dolly; only nobody except Dorothea was aware of
this explanation. She was very willing to talk to him of
Dolly, and she was very anxious to do her duty to Dolly in
keeping Mervyn at arm's length. But the latter task was by
no means easy; partly because she was doing violence to
her own inclinations—partly because Mervyn was of a
nature not to be easily checked.

Matters had developed fast in these few days. When

Dorothea first came to Craye, she liked Mervyn, and she
knew that she could like him very much more. The potential
had now become the positive. Dorothea not only liked him
very much more, but she felt that for her, he stood alone as
the man who was unlike all other men. This means
something far beyond mere liking; yet for Dolly's sake
Dorothea strove hard to hide what she felt, to treat him as
a mere acquaintance.

Perhaps she was less successful in veiling her true feelings

than she imagined. Perhaps Mervyn had a keener insight
into woman's nature than Edred. The more Dorothea
endeavoured to hold aloof, the more persistently he came
after her. Both young men were constantly in and out of the
house all through that week, and both appeared to come
mainly for the purpose of talking to Dorothea. There was no
appearance of jealousy between them; perhaps because the
sunny-tempered Mervyn was not given to jealousy, perhaps
because Edred felt too secure. So, at least, people
conjectured. It might easily be thought by a looker-on that
she gave encouragement to Edred. She was more at her
ease with him than with Mervyn.

And poor little Dolly all this while was hors de combat,
unable to fight her own battle. It did seem hard to the elder
sisters; both of whom had now a pretty clear understanding
of the state of Dolly's mind, and neither of whom supposed
Dorothea to be fighting Dolly's battle for her—only through
ignorance fighting it wrongly. Isabel and Margot had seen
with pleasure Mervyn's evident fancy for Dorothea; and
they would have been equally pleased to see the "fancy"
returned. Attentions from Edred were another matter, and
that his attentions should be apparently well received, while
those of Mervyn were more or less rebuffed, exercised the
sisters greatly.

"I think it is too bad—quite too bad!—and I wish they had

never come to Woodlands at all," Isabel declared hotly.

Margot could have echoed the wish. "But that is hardly fair,"
she said. "Edred might never have cared for Dolly in any
case,—and I am sure Dorothea does not know how things
are."

"Then she ought to know! People ought to use their eyes,"

said unreasonable Isabel.

"Some people haven't the gift," remarked Margot, thinking

how slow Isabel herself had been.

"Why shouldn't one give her a hint, Margot? I'll do it."

Margot shook her head. She had a great dread of interfering

in such matters. Simple blundering Isabel, who had done
damage before by her outspokenness, pondered the matter
for a whole half-hour, and came to the conclusion that this
was a case for open speech. People like Isabel who meddle
in everything, do harm nine times out of ten; but the tenth
time they occasionally manage to set wrong right, thereby
gaining encouragement to proceed in the same course. The
nine times are forgotten—the one is remembered.

Twice a day Dorothea was allowed to see Dolly for a chat.

She would gladly have stayed longer than the stipulated
fifteen or twenty minutes; but no encouragement to do so
was given. Dorothea was keenly aware that, Dolly did not
care to have her. A barrier seemed to divide them; and not
all Dorothea's efforts could do away with it. "And yet we
ought to be friends," she said often to herself.

Mervyn and Edred had each promised separately to look in

late that last afternoon—Mervyn to say good-bye to the
Tracys, Edred to say good-bye to the Erskines. "About tea-
time," both had said; and there was some idea of Dolly
coming down for the first time; but though perhaps well
enough, she seemed to shrink from the exertion.

The matter was still undecided at four o'clock. "Will she

come!" Dorothea asked eagerly, meeting Isabel on the
stairs. Isabel gazed absently, with wrinkled brow, and asked
"Who?"

"I mean Dolly. Margot said she might be able. Wouldn't it do

her good?—to be downstairs, I mean."

Isabel was too much absorbed with one idea to have room
in her mind for any other train of thought. "Yes,—no,—I am
not sure. Dolly isn't sure yet, I believe," she said vaguely,
moving towards the nearest open door on the next landing,
with the air of one expecting to be followed. "I have been
thinking that I—I—there is something I should rather like to
ask you."

Dorothea walked after her into the bedroom, and waited.

Isabel carefully closed the door, and then fidgeted to the

fireplace.

"Dolly seems so depressed just now, doesn't she! Has she

not seemed so to you?"

"Yes; I wish she did not. But perhaps in a few days she will
be better."

"She is getting over the fall. It is not only that now: at

least, I believe not. I am speaking privately—I mean I
shouldn't like what I say repeated to anybody—but—but—"
blundered Isabel, "you see, we seem to know you pretty
well now. And you have seen a great deal of the
Claughtons."
"Yes, a good deal." Dorothea could not restrain a slight
blush.

"And I thought I would just ask—I thought I could just put a

little question. I should like so much to know whether it has
struck you—whether you have an impression that either of
them cares at all for Dolly,—cares very particularly, I
mean."

Dorothea was silent. If she had had merely an "impression,"

she could have told it at once; but how could she betray
Edred's confidence to Isabel?

"You see I am asking for Dolly's sake. One can't help

noticing,—and I dare say you have noticed that she does
seem to—well, to have a particular liking for one of them—
more than just friendship."

Dorothea said "Yes" again.

"I was sure you couldn't help seeing. At one time we really
thought something was coming of it,—but lately I have felt
doubtful. He doesn't seem to take the same pains,—and I
do believe that is why poor little Dolly is so down-hearted.
Of course, one can't do anything: and, as Margot says,
things must be left to take their own course. Still, I thought
I might just ask you, as a friend, whether you have noticed
—"

Dorothea liked to be treated as a friend, and she had

noticed a great deal; but she was puzzled what response to
make.

"I can't imagine for my part what has made him so stiff and
cold," said Isabel, knitting her brows. "Of course, he never
is very lively—still, he used not to be like this. Margot says
—but I don't believe—"
Dorothea broke into the confused sentences.

"Mr. Mervyn Claughton stiff and cold!"

"Mervyn! I'm speaking of Edred, of course. You haven't

supposed that I meant Mervyn all the while!"

Dorothea stood mute; her eyes unwontedly bright.

"You didn't think Dolly cared for Mervyn!" exclaimed Isabel.

"You couldn't—possibly!"

"I suppose it was stupid of me, but I really did!"

Isabel stood looking with puzzled eyes. "I don't know what I
have said to make you so happy," she said.

"Don't ask me anything, please," begged Dorothea in

answer. "Don't say any more. Only let me see Dolly for a
few minutes,—and if I can persuade her to go into the study
for an hour, don't put any difficulties in the way. I have my
reasons: and I must not explain."

"Dolly to go into the study!"

"Yes. It will be all right, only please just let it be so. I want
to see Dolly alone. I will not repeat a word that you have
said."

Two minutes later, Dorothea, vividly conscious that Isabel

had cut a Gordian knot, was kneeling beside Dolly's couch.

"Dolly, I have something to propose," she said softly. "Dolly,

listen to me. Margot thought you were too tired to come
down among us all to-day. But I want you not to mind being
tired. I want you to manage just to get to the study sofa for
an hour."
"What for?" asked Dolly languidly.

"Because—" and she lowered her voice,—"Mr. Edred

Claughton will be so disappointed if he cannot see you once
more before he goes."

If Dorothea had any doubts remaining, the glow which leapt

to Dolly's white face was enough to do away with them.

"He and I feel so guilty about this week," Dorothea went on.
"It was all our fault,—your being laid up, I mean. If we had
not both been so stupidly full of what we were talking
about, we should have had our wits about us, and there
need have been no collision."

"It can't be helped."

"I almost think you would forgive us both, if you knew what
it was that interested us so much. Guess! What do you
think it could be?"

"I don't know."

"It was—Dolly, of course. What else could be so

engrossing?"

Dolly's cheeks became brighter still.

"I don't think I ought to say much more. I would not say so
much to any one except you. But—I do know that he is
longing to see you before he goes; and I thought—if you
could get down to the study, that might be the best way.
And, Dolly—" very softly—"darling, don't be too cold. He has
been so hopeless,—and I don't think he has much pluck."

Dolly said not a word in answer. She only put both arms
round Dorothea, and held her fast, as if thus cementing the
friendship which was to have been, but which hardly yet
had begun to be between them.

Five o'clock drew near, and Dolly was in the study. Dorothea
wondered how affairs would fit in. Would Edred be too shy
to use his opportunity? And would Mervyn appear at all?
Her thoughts were in a whirl, but by no means on her own
account only. The last few days had been an education in
unselfishness.

Both Colonels were absent on a long ramble, and Mrs.

Erskine had not appeared from her afternoon repose, when
the two Claughtons marched in together. Isabel fled at the
sound of the front door opening; Margot alone remaining
with Dorothea. The latter could not guess whether this were
a condition of things purposely arranged. She only knew
that it was unusual. Her own face, commonly pale, had
perhaps never been brighter or prettier than now when for
the first time she could venture to meet Mervyn with an
unchecked smile of welcome. She did not seem excited, but
there was a glow in her cheeks, and the placid eyes shone
softly through their glasses.

"Dolly is in the study," Margot remarked, as Edred glanced

round.

Margot had evidently no intention of saying more. She

seated herself, and began to talk to Mervyn, while Edred
showed not the least disposition to act on his own behalf. In
another moment, he too would have subsided into a chair,
but Dorothea stood up, and came close to him.

"Dolly is in the study," she repeated in an undertone, not

meant for the other two. "You told me yesterday that you
wanted to see her."

"Well, yes," assented Edred.

"She is there on the sofa; why not go to her—now?"

"At once!" Edred seemed reluctant. "What is the use?" he

asked despondingly.

"The use! Make it of use. O go, do go!"

The voice, though low, was energetic enough to reach

Margot and Mervyn. Edred actually obeyed without another
word; and as the door closed behind him, Dorothea turned
to meet two smiling faces.

"Never was better advice given," uttered Mervyn. "I have a

mind to follow it myself. Margot—be kind! All the world will
buzz about our ears directly. Don't you think you ought, as
a duty, to keep watch outside the study-door? Just for five
minutes!"

"That would be a double kindness, I suppose! Well—just for

five minutes!" and Margot too left the room.

Dorothea, occupied still with Dolly, did not see through this
move, till she found herself alone with Mervyn, felt her
hands imprisoned in his, and heard him say—

"We have only five minutes! Not a moment to lose!

Dorothea—if anybody in the world understands me, it is
yourself. Do you know me well enough—to—"

Then she knew what was coming, and she did not shrink
from it. Thanks to Isabel's cutting of the tangled knot, she
had no hesitation as to what answer she might or would
give.

Within the specified five minutes, Dorothea had become the

affianced wife of Mervyn; and within half-an-hour, Dolly was
the affianced wife of the less expeditious Edred.
"Nothing could have been better managed. It really is
delightful all round," declared Isabel to Margot, dallying in
her room late that night. "I always knew the Claughtons
would be charmed. Emmeline is hard to please, but she
really does take to Dorothea. And as for Colonel Tracy, I
believe he wants nothing more than to get her off his
hands."

"Now, Issy!"

"You know what I mean. He is an odd man, and he can't

help it, I suppose. But I am sure Dolly and Dorothea look
the picture of happiness. I believe Dorothea will be the
making of Mervyn. He is a nice fellow, though Emmeline
underrates him to such an extent. I wonder what Edred's
friend Mrs. Effingham will say?"

"She has not much to do with the matter. I often wonder

she has not taken more trouble about Dorothea."

"Oh, well—people in London have no time, and she is

always in a bustle. But isn't this a curious finale to the long
quarrel,—that the two babies, Christened together, and then
never meeting till they are nearly twenty, should marry
brothers, and become almost sisters! Now, Margot, I know I
often seem to you a great deal too outspoken, and perhaps
I am. But just this once, don't you think I was right?"

"Just this once, Issy, I haven't a word to say," Margot

answered.
THE END
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