Speaker(s):   Ananth Raman (HBS)
Title:              Supply Chain Incentives: A Discussion of the Managerial Problem and Academic Literature

 

Abstract

The talk will focus on a recent paper that I co-authored with V.G.Narayanan (in the FRC unit) and Jasjit Singh, a PH.D. student in Business Economics, "Agency Costs in a Supply Chain with Demand Uncertainty and Price Competition." The paper has been accepted for publication in Management Science. This paper examines the contracting problem between a manufacturer and two competing retailers, who then choose prices and stocking quantities. The paper shows that the optimal wholesale price serves multiple roles in this context and channel profits and retail prices will be lower than "first best" in such a supply chain. On the other hand, the supply chain can achieve first-best retail prices, fill rates, and profits if the manufacturer can subsidize leftover inventory.

More broadly, the talk will serve as a tutorial on supply chain incentives. In other words, it will serve as an introduction to 1. an important operations management problem (supply chain contracts and incentives), 2. a research methodology (math modeling in supply chains), and 3. a literature stream that has grown rapidly in the last few years.

Time permitting, we will revert to discussing current research that V.G. and I are working on. We will examine the managerial problem and recommendations that can be gleaned from the literature