TY - GEN
T1 - Supplier competition
T2 - 5th International Conference on Industrial Engineering and Operations Management, IEOM 2015
AU - Blake, Roger
AU - Elahi, Ehsan
N1 - Publisher Copyright:
© 2015 IEEE.
PY - 2015/4/23
Y1 - 2015/4/23
N2 - We use laboratory experiments to investigate the decisions made by suppliers when they compete for the demand share of a buyer in an outsourcing setup. More specifically, we consider a supply chain in which a single buyer outsources the manufacture of a product to suppliers not on the basis of price, but rather on service. Three different criteria on which suppliers compete are evaluated: 1) a guaranteed specific inventory fill-rate, 2) guaranteed level of base-stock, and 3) a parameter optimizing the supply chain in the buyer's favor. Our results show that in most cases, suppliers' decisions are significantly different than the Nash equilibrium, meaning that they do not maximize profit. To explain this deviation of experimental results from what theory predicts, we examine the impact of three behavioral factors: (a) loss aversion, (b) rival chasing, and (c) the gamesmanship behavior which is defined as the suppliers' tendency to beat the competition instead of maximizing the profit.
AB - We use laboratory experiments to investigate the decisions made by suppliers when they compete for the demand share of a buyer in an outsourcing setup. More specifically, we consider a supply chain in which a single buyer outsources the manufacture of a product to suppliers not on the basis of price, but rather on service. Three different criteria on which suppliers compete are evaluated: 1) a guaranteed specific inventory fill-rate, 2) guaranteed level of base-stock, and 3) a parameter optimizing the supply chain in the buyer's favor. Our results show that in most cases, suppliers' decisions are significantly different than the Nash equilibrium, meaning that they do not maximize profit. To explain this deviation of experimental results from what theory predicts, we examine the impact of three behavioral factors: (a) loss aversion, (b) rival chasing, and (c) the gamesmanship behavior which is defined as the suppliers' tendency to beat the competition instead of maximizing the profit.
KW - Behavioral Operations Management
KW - Gamesmanship Equilibrium
KW - Inventory Competition
KW - Optimal Mechanism
KW - Outsourcing
KW - Quantal Response Equilibrium
KW - Service Competition
UR - https://www.scopus.com/pages/publications/84931081047
UR - https://www.scopus.com/pages/publications/84931081047#tab=citedBy
U2 - 10.1109/IEOM.2015.7093933
DO - 10.1109/IEOM.2015.7093933
M3 - Conference contribution
AN - SCOPUS:84931081047
T3 - IEOM 2015 - 5th International Conference on Industrial Engineering and Operations Management, Proceeding
BT - IEOM 2015 - 5th International Conference on Industrial Engineering and Operations Management, Proceeding
PB - Institute of Electrical and Electronics Engineers Inc.
Y2 - 3 March 2015 through 5 March 2015
ER -