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Contract complexity and performance under asymmetric demand information / Basak Kalkanci in Management science, Vol. 57 N° 4 (Avril 2011) 

Public ISBD [article]  in Management science > Vol. 57 N° 4 (Avril 2011) . - pp. 689-704 Titre : Contract complexity and performance under asymmetric demand information : An experimental evaluation Type de document : texte imprimé Auteurs : Basak Kalkanci, Auteur ; Kay-Yut Chen, Auteur ; Feryal Erhun, Auteur Année de publication : 2011 Article en page(s) : pp. 689-704 Note générale : Management Langues : Anglais (eng) Mots-clés : Behavioral  operations  management  All-unit  quantity  discount  contracts  Price-only  contracts  Complex  contracts  Contract  performance  Supply  chain  efficiency  Asymmetric  demand  information  Experience-weighted  attraction  learning  model Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : Exploring the tension between theory and practice regarding complexity and performance in contract design is especially relevant. The goal of this paper is to understand why simpler contracts may commonly be preferred in practice despite being theoretically suboptimal. We study a two-tier supply chain with a single supplier and a single buyer to characterize the impact of contract complexity and asymmetric information on performance and to compare theoretical predictions to actual behavior in human subject experiments. In the experiments, the computerized buyer faces a newsvendor setting and has better information on end-consumer demand than the human supplier. The supplier offers either a quantity discount contract (with two or three price blocks) or a price-only contract, contracts that are commonplace in practice, yet different in complexity. Results show that, contrary to theoretical predictions, quantity discounts do not necessarily increase the supplier's profits. We also observe a more equitable distribution of profits between the supplier and the buyer than what theory predicts. These observations can be described with three decision biases (the probabilistic choice bias, the reinforcement bias, and the memory bias) and can be modeled using the experience-weighted attraction learning model. Our results demonstrate that simpler contracts, such as a price-only contract or a quantity discount contract with a low number of price blocks, are sufficient for a supplier designing contracts under asymmetric demand information. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/cgi/content/abstract/57/4/689 [article] Contract complexity and performance under asymmetric demand information : An experimental evaluation [texte imprimé] / Basak Kalkanci, Auteur ; Kay-Yut Chen, Auteur ; Feryal Erhun, Auteur . - 2011 . - pp. 689-704. Management Langues : Anglais (eng) in Management science > Vol. 57 N° 4 (Avril 2011) . - pp. 689-704 Mots-clés : Behavioral  operations  management  All-unit  quantity  discount  contracts  Price-only  contracts  Complex  contracts  Contract  performance  Supply  chain  efficiency  Asymmetric  demand  information  Experience-weighted  attraction  learning  model Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : Exploring the tension between theory and practice regarding complexity and performance in contract design is especially relevant. The goal of this paper is to understand why simpler contracts may commonly be preferred in practice despite being theoretically suboptimal. We study a two-tier supply chain with a single supplier and a single buyer to characterize the impact of contract complexity and asymmetric information on performance and to compare theoretical predictions to actual behavior in human subject experiments. In the experiments, the computerized buyer faces a newsvendor setting and has better information on end-consumer demand than the human supplier. The supplier offers either a quantity discount contract (with two or three price blocks) or a price-only contract, contracts that are commonplace in practice, yet different in complexity. Results show that, contrary to theoretical predictions, quantity discounts do not necessarily increase the supplier's profits. We also observe a more equitable distribution of profits between the supplier and the buyer than what theory predicts. These observations can be described with three decision biases (the probabilistic choice bias, the reinforcement bias, and the memory bias) and can be modeled using the experience-weighted attraction learning model. Our results demonstrate that simpler contracts, such as a price-only contract or a quantity discount contract with a low number of price blocks, are sufficient for a supplier designing contracts under asymmetric demand information. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/cgi/content/abstract/57/4/689

Trust in forecast information sharing / Özalp Özer in Management science, Vol. 57 N° 6 (Juin 2011) 

Public ISBD [article]  in Management science > Vol. 57 N° 6 (Juin 2011) . - pp. 1111-1137 Titre : Trust in forecast information sharing Type de document : texte imprimé Auteurs : Özalp Özer, Auteur ; Yanchong Zheng, Auteur ; Kay-Yut Chen, Auteur Année de publication : 2011 Article en page(s) : pp. 1111-1137 Note générale : Management Langues : Anglais (eng) Mots-clés : Trust  Trustworthiness  Cheap  talk  Asymmetric  forecast  information  Wholesale  price  contract  Behavioral  economics  Experimental  economics Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : This paper investigates the capacity investment decision of a supplier who solicits private forecast information from a manufacturer. To ensure abundant supply, the manufacturer has an incentive to inflate her forecast in a costless, nonbinding, and nonverifiable type of communication known as “cheap talk.” According to standard game theory, parties do not cooperate and the only equilibrium is uninformative—the manufacturer's report is independent of her forecast and the supplier does not use the report to determine capacity. However, we observe in controlled laboratory experiments that parties cooperate even in the absence of reputation-building mechanisms and complex contracts. We argue that the underlying reason for cooperation is trust and trustworthiness. The extant literature on forecast sharing and supply chain coordination implicitly assumes that supply chain members either absolutely trust each other and cooperate when sharing forecast information, or do not trust each other at all. Contrary to this all-or-nothing view, we determine that a continuum exists between these two extremes. In addition, we determine (i) when trust is important in forecast information sharing, (ii) how trust is affected by changes in the supply chain environment, and (iii) how trust affects related operational decisions. To explain and better understand the observed behavioral regularities, we also develop an analytical model of trust to incorporate both pecuniary and nonpecuniary incentives in the game-theoretic analysis of cheap-talk forecast communication. The model identifies and quantifies how trust and trustworthiness induce effective cheap-talk forecast sharing under the wholesale price contract. We also determine the impact of repeated interactions and information feedback on trust and cooperation in forecast sharing. We conclude with a discussion on the implications of our results for developing effective forecast management policies. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/57/6.toc [article] Trust in forecast information sharing [texte imprimé] / Özalp Özer, Auteur ; Yanchong Zheng, Auteur ; Kay-Yut Chen, Auteur . - 2011 . - pp. 1111-1137. Management Langues : Anglais (eng) in Management science > Vol. 57 N° 6 (Juin 2011) . - pp. 1111-1137 Mots-clés : Trust  Trustworthiness  Cheap  talk  Asymmetric  forecast  information  Wholesale  price  contract  Behavioral  economics  Experimental  economics Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : This paper investigates the capacity investment decision of a supplier who solicits private forecast information from a manufacturer. To ensure abundant supply, the manufacturer has an incentive to inflate her forecast in a costless, nonbinding, and nonverifiable type of communication known as “cheap talk.” According to standard game theory, parties do not cooperate and the only equilibrium is uninformative—the manufacturer's report is independent of her forecast and the supplier does not use the report to determine capacity. However, we observe in controlled laboratory experiments that parties cooperate even in the absence of reputation-building mechanisms and complex contracts. We argue that the underlying reason for cooperation is trust and trustworthiness. The extant literature on forecast sharing and supply chain coordination implicitly assumes that supply chain members either absolutely trust each other and cooperate when sharing forecast information, or do not trust each other at all. Contrary to this all-or-nothing view, we determine that a continuum exists between these two extremes. In addition, we determine (i) when trust is important in forecast information sharing, (ii) how trust is affected by changes in the supply chain environment, and (iii) how trust affects related operational decisions. To explain and better understand the observed behavioral regularities, we also develop an analytical model of trust to incorporate both pecuniary and nonpecuniary incentives in the game-theoretic analysis of cheap-talk forecast communication. The model identifies and quantifies how trust and trustworthiness induce effective cheap-talk forecast sharing under the wholesale price contract. We also determine the impact of repeated interactions and information feedback on trust and cooperation in forecast sharing. We conclude with a discussion on the implications of our results for developing effective forecast management policies. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/57/6.toc