2016 INFORMS Annual Meeting Program

WB27

INFORMS Nashville – 2016

WB28 201B-MCC Product Recalls Sponsored: Manufacturing & Service Oper Mgmt Sponsored Session Chair: Harish Krishnan, University of British Columbia, Vancouver, BC, Canada, krishnan@sauder.ubc.ca Co-Chair: Juan Camilo Serpa, Assistant Professor, McGill University, 1001 Rue Sherbrooke O, Montreal, QC, H3A 1G5, Canada, juan.serpa@sauder.ubc.ca 1 - Cover-up Of Safety Hazards: Delays In Voluntary Product Recalls Woonam Hwang, Assistant Professor, HEC Paris, Paris, France, hwang@hec.fr, Soo-Haeng Cho, Victor DeMiguel Product safety regulators often have to rely on manufacturers’ voluntary disclosure of information when investigating product defects, because manufacturers have better information about safety hazards through internal testing and warranty claims. However, manufacturers may not always truthfully report all safety hazard information. For instance, several automakers including GM and Toyota have been recently accused of deliberately hiding safety hazards from regulators and delaying product recalls, putting the public in danger. In this paper, we investigate how regulators can induce manufacturers to truthfully report any safety issues in a timely manner. 2 - Board Composition And Firm Responsiveness To Product-harm Crises George Ball, Indiana University, Kelley School of Business, gpball@indiana.edu, Kaitlin Wowak, Corinne Post Even though firms are subjected to the same regulatory, consumer protection, and market pressures, they vary considerably in how swiftly they issue recalls in product-harm situations. In this study, we explore how firm responsiveness to product recalls is impacted by several Board of Director characteristics, including female board representation and board independence. We study these questions using over 5,000 recalls from a 12-year panel covering all recalls in industries regulated by the U.S. Food and Drug Administration (e.g., Food, Medical Devices, and Pharmaceuticals). 3 - Why Do Automakers Initiate Recalls? A Structural Econometric Study Ahmet Colak, Northwestern University, Evanston, IL, United States, a-colak@kellogg.northwestern.edu, Robert Louis Bray We model a manufacturer’s and regulator’s joint recall decisions as a dynamic discrete choice game. We estimate our model with 14,124 U.S. auto recalls and 976,062 defect reports over the period 1994—2015. We find that (i) automakers initiate recalls mainly to avoid field failure costs, and (ii) automakers don’t preempt the regulator’s interventions in 86% of our sample. Managing Responsibility in Supply Chains Sponsored: Manufacturing & Service Oper Mgmt, Sustainable Operations Sponsored Session Chair: Jing-Sheng Jeannette Song, Duke University, Durham, NC, United States, jssong@duke.edu 1 - Cooperative Approaches To Managing Social Responsibility In Supply Chains: Joint Auditing And Information Sharing Soo-Haeng Cho, Carnegie Mellon University, soohaeng@andrew.cmu.edu, Xin Fang This paper investigates two cooperative approaches of firms’ managing social responsibility violations of suppliers: auditing a common supplier jointly or sharing independent audit results with other firms. We develop a model based on a cooperative game in partition function form, and show that: (1) competing firms have incentives to cooperate when the negative externality of one firm’s social responsibility violation on other firms is high; and (2) neither cooperative approach necessarily improves social responsibility, especially when one firm can benefit from others’ social responsibility violations (i.e., the positive externality is high). WB29 202A-MCC

5 - Are All Data Thieves Created Equal? An Empirical Analysis Of Customer Response To Identity Theft John N Angelis, Elizabethtown College, 100 Farmhouse Lane, Mountville, PA, 17554, United States, angelisj@etown.edu, Joseph C Miller The popular press tends to report on data hacking and identity theft instances as if all such crimes are relatively equal in business impact and public perception. To challenge this assertion, we exposed independent study panels to four unique recent real-world instances of identity theft. Analysis reveals that the extent to which thieves, the business, and customers are blamed for their role in the crime is highly dependent on both parameters of the localization of the breached firm and the uniqueness of the identity of the customers affected, as well as perceived cleverness of said thieves. In certain cases, the public will assign equivalent blame to both affected customers and the hacked business. WB27 201A-MCC Information and Consumer Behavior in Supply Chain Management Sponsored: Manufacturing & Service Oper Mgmt Sponsored Session Chair: Hyoduk Shin, UC-San Diego, La Jolla, CA, United States, hdshin@ucsd.edu 1 - Loss Aversion And The Uniform Pricing Puzzle For Media And Entertainment Products Javad Nasiry, Hong Kong University of Science and Technology- HKUST, nasiry@ust.hk The uniform pricing puzzle for vertically differentiated media and entertainment products (movies, books, music, mobile apps, etc.) is that a firm with market power sells high- and low-quality products at the same price even though quality is perfectly observable and price adjustments are not costly. We resolve this puzzle by assuming that consumers have an uncertain taste for quality and accounting for consumer loss aversion in monetary and consumption utilities. The novelty of our approach is that the so-called reference transactionis endogenously set as part of a “personal equilibrium” and is based only on past purchases of same-quality products. 2 - Generalized Reverse Auctions: Efficiency And Credibility Under Information Asymmetry Hedayat Alibeiki, McGill University, 1001 Sherbrooke Street West, Desautels Faculty of Management, Montreal, QC, H3A 1G5, Canada, hedayat.alibeiki@mail.mcgill.ca, Mehmet Gumus Non-price factors such as product quality and reliability can be even more important than bidding prices for the buyers when selecting the winner of an e- Auction. In practice, buyers usually evaluate and assign an originally-private “quality score” to each supplier that determines the relative position of the supplier toward its competitors. In this paper, we study whether or not and in what fashion the buyer can credibly share suppliers’ quality scores with them. 3 - Incentives For Sharing Cyber-security Breaches Among Competing Firms Noam Shamir, Tel Aviv University, nshamir@post.tau.ac.il Presidential Executive Order 13691, which was issued by President Obama, characterizes cyber threats as a “national emergency”. This executive order calls for increased cooperation and information sharing on such threats. A main concern regarding this initiative is related to the companies’ incentives to pool cyber threat information. Although policy makers claim that the companies will benefit from a shared database of threat assessment information, each company must find it beneficial to share its cyber-threat information. In this work we evaluate the incentives of companies that operate in a competitive environment to share such information.

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