Xinghao Yan

Contract efficiency for a decentralized supply chain in the presence of quality improvement

In this paper, we study a joint pricing and product quality decision problem in a decentralized supply chain consisting of one manufacturer and one retailer. Although the manufacturer decides the product quality with an associated cost, the retailer decides the retail price. We aim to study and compare different contract formats for this decentralized supply chain. There is a trade-off in the choice of contracts: simpler format contract (with a few parameters) is less complicated, but the contract efficiency is low. We start with the simplest one-parameter contract: a wholesale price contract that serves as the benchmark. We then study how contract efficiency can be improved by adding one more parameter. Specifically, we consider three two-parameter contracts that are commonly used in reality: two-part tariff contract, revenue-sharing contract, and effort cost sharing contract. We find that the contract efficiency is improved under all the three contracts, but in different ways: the improvement in contract efficiency under each of them dominates the other two when manufacturers quality improvement effectiveness is relatively low, moderate, and high, respectively. Furthermore, through numerical examples, we find that under some cases, a choice from these three two-parameter contracts can achieve a close-to-perfect efficiency (>85%). Finally, we investigate whether a combination of the three two-parameter contracts can achieve coordination. Interestingly, we find that only the combination of effort cost sharing contract and revenue-sharing contract can achieve coordination, whereas combinations of either of them and two-part tariff contract cannot.

Inventory sharing and coordination among n independent retailers

Inventory sharing among decentralized retailers has been widely used in practice to improve profitability and reduce risks at the same time. We study the coordination of a decentralized inventory sharing system with n (n > 2) retailers who non-cooperatively determine their order quantities but cooperatively share their inventory. There has been very limited research on coordinating such a system due to the many unique challenges involved, e.g., incomplete residual sharing, formation of subcoalitions for inventory sharing etc. In this paper, we develop a coordination mechanism (nRCM) that simultaneously possesses a few important properties—leading to formation of only grand coalition, inducing complete residual sharing, and ensuring each retailer obtains a higher profit as the system size increases. We also consider the impact of asymmetric demand distribution parameter information on the coordination mechanisms when the retailers privately hold such information. We show that although true coordination requires complete information sharing, under any n-retailer inventory sharing coordination mechanism, retailers may not have incentives to share information with all other retailers and will not share true information even if they do so. In this regard, nRCM possesses another important property: it can be implemented under asymmetric information and retailers can obtain profits very close to their first-best profits even if they do not share demand information. Such nice properties of nRCM also hold when retailers have correlated demands. This paper is the first to study coordination mechanism for an n-retailer (n > 2) inventory sharing system considering asymmetric information.

Customer Revenue Sharing Program in Online Social Media

Online social media (OSMs) have become a popular and growing phenomenon on the Internet, as exemplified by the millions of followers of websites like YouTube, Twitter and Facebook. Given the ease of access and high competition over the Internet to attract users, a question that arises is whether OSMs should develop revenue sharing programs and reward their contributing users. Aiming to expand market share and boost revenue, some OSMs recently have realized the influence of these programs in changing the outcome of their online competition. We model this competition by a duopoly game where users are either active or passive with respect to each OSM. We assume the OSMs are generally asymmetric, in that online users have a general preference for one. The game includes two steps: first, the OSMs simultaneously announce their rewards for active users, and second, users choose their level of contribution with respect to each OSM based on their preference. We show this game has a unique Nash equilibrium in pure strategies and specify how OSMs can derive the optimal reward payments. Our results include that, at equilibrium, no user will choose to contribute content exclusively to the less attractive OSM. In addition, we find that the more favourable OSM always receives a higher profit, even when it shares a lower reward. Based on numerical analysis, in most cases, the more favourable OSM shares a higher (lower) reward than the less favourable one, when the impact of active users’ contribution on OSMs revenue is small (high). Furthermore, we identify the conditions under which symmetric equilibrium exists despite the asymmetry between the OSMs.

Influenza vaccine supply chain with vaccination promotion effort and its coordination

ABSTRACT We develop an influenza vaccination supply chain model consisting of a health authority, a vaccine manufacturer, and the population. The health authority determines the order quantity and the cos to increase the vaccination rate; the manufacturer determines the production effort, subject to random yield; and the population determines the vaccination probability, which depends on the health authoritys promotion effort and the realized vaccine supply. We find that the population has limited incentive to vaccinate due to free riding when there is no vaccine shortage, but has full incentive when there is a vaccine shortage. The manufacturer and the health authority have lower incentives for production and vaccine demand promotion in a decentralized system than in a centralized system. However, the health authority may pursue an aggressive ordering strategy in which the order quantity may be even higher than the level leading to herd immunity. We show that an outcome-based coordinating contract in which the payment depends on the number of infections cannot take a simple linear format. However, even with very limited verifiable information, a contract with a simple linear or piecewise linear format with respect to order quantity can achieve coordination under a wide range of vaccine prices.