Informs Annual Meeting Phoenix 2018

INFORMS Phoenix – 2018

TB18

2 - Incentive Mechanisms for Managing Hidden Rebates and Deceptive Quotes of a Procurement Service Provider Xiaoshuai Fan, Hong Kong University of Science and Technology, Kowloon, Hong Kong, Ying-Ju Chen, Christopher S. Tang When sourcing through a procurement service provider (PSP), the retailer may end up selecting an inefficient manufacturer due to conflicting interests and information asymmetry. PSPs may collect rebates from some willing manufacturers that are “hidden” from the retailer and have incentive to help them win the order by inflating or omitting quotes from those unwilling manufacturers. To reveal PSP’s private information, we explore a deterministic incentive mechanism based on a selection rule and a service fee structure. We show it is Pareto-improving for the retailer and the PSP. Furthermore, when the retailer can penalize the PSP for deceptive quote, we develop a stochastic incentive mechanism. 3 - Speculative Shortages in Agricultural Supply Chains: The Effect of Government Interventions Somya Singhvi, MIT, 235 Albany Street, Cambridge, MA, 02139, United States, Retsef Levi, Yanchong Zheng Speculative shortages that lead to exorbitant increases in retail prices of essential commodities are a matter of great concern for governments, who employ a range of strategies to mitigate this phenomenon and its impact. We develop analytical models to capture the dynamics of speculative shortages and the impact of government interventions on market behavior and prices. We validate our models using retail price data from India and highlight that to be effective, interventions need to be carefully designed while taking potential strategic responses of market players into account. 4 - Impact of Travel Delay in Queues Wanyi Li, Stanford University, Stanford, CA, United States, Daniela Saban, Erica Plambeck In service industry, customers have to travel to a server to join the queue. Our project studies the impact of travel delay on queue dynamics in a single server setting. When arrival to queue is not instantaneous, the phenomenon of queue length oscillation may arise. We analyze the welfare impact and waiting time impact that travel delay has on the system. We also identify the parameter regime under which the queue will be stable. We show that oscillation of queue length due to travel delays hurts customer welfare in general. Our theoretical results have important implications on the food processing industry and gives insights on waiting time announcement design in this industry. Managing Incentives to Improve Performance Sponsored: Manufacturing & Service Oper Mgmt/Supply Chain Sponsored Session Chair: Izak Duenyas, University of Michigan-Ann Arbor, Ann Arbor, MI, 48109-1234, United States 1 - Audit and Remediation Strategies in the Presence of Evasion Capabilities Shouqiang Wang, The University of Texas at Dallas, Naveen Jindal School of Management, 800 W. Campbell Rd, Richardson, TX, 75080, United States, Francis E. De Vericourt, Peng Sun Firms often face negative externalities from privately observable stochastic events that occur at another party. To mitigate these externalities, the firm needs to know in time if such an event has occurred and hold the other party liable. The other party, however, prefers to conceal the event’s occurrence so as to evade its responsibility. The goal of this paper is to devise efficient strategies for firms to uncover the occurrence of stochastic events such as these. 2 - Procurement Mechanismswith Post-auctionpre-selection Cost-reduction Investigations George Chen, London Business School, London, United Kingdom, Damian Beil, Izak Duenyas Consider the following procurement setting: After seeing suppliers’ bids, the buyer can choose to investigate some suppliers to identify cost-reduction opportunities; the investigated suppliers’ costs will decrease by the identified cost- reductions; the buyer then awards the contract. We characterize the optimal first-price sealed-bid mechanism, as well as an optimal mechanism among a wider class of mechanisms. For ex-ante symmetric suppliers, incorporating investigations create an ex ante win-win situation for everyone. The win-win may break down when suppliers are sufficiently asymmetric, but no supplier has the incentive to unilaterally block investigation. n TB17 North Bldg 127C

3 - Optimal Contract for Machine Repairing and Maintenance Feng Tian, University of Michigan, 2231 Stone Road, Ann Arbor, MI, 48105, United States, Peng Sun, Izak Duenyas A principal hires an agent to repair a machine when it is down and maintain it when it is up. If the agent exerts effort, the downtime is shortened, and uptime is prolonged. The effort, however, is costly to the agent and unobservable to the principal. The principal intends to design the optimal dynamic contract, which involves payments and contract termination, to induce the agent to always exert effort. We formulate this problem as a stochastic optimal control model with incentive constraints in continuous time over an infinite horizon. Although we allow payments to take general forms to depend on all past public information, the optimal contract has a simple and intuitive structure. Networks, Matching and Platforms Emerging Topic: Business Model Innovation Emerging Topic Session Chair: Yiangos Papanastasiou, University of California Berkeley, Berkeley, CA, 94720, United Kingdom 1 - Dynamic Allocation Without Money: An Equivalence Result Nicholas A. Arnosti, Columbia Business School, 3022 Broadway, Uris Hall rm 402, New York, NY, 10027, United States We consider a large-market model in which objects of different types are dynamically assigned to waiting agents, who have arbitrary preferences over object types. We find that using independent lotteries is equivalent to using a single waitlist in which applicants lose their position after rejecting an offer. Furthermore, these systems are equivalent to clearing the market with virtual currency. Finally, we show that using multiple waitlists is equivalent to using a single waitlist in which applicants are allowed to keep their position after rejecting an offer. 2 - Market for Personal Data? Azarakhsh Malekian, University of Toronto, 35 Oak St., Somerville, MA, 02143, United States With the increasing ease with which personal information can be accessed, the issue of privacy has become central for the functioning of various online platforms. In this talk, we study the privacy implications of market design for personal information. 3 - Platforms for Socially Responsible Operations Daniela Saban, Stanford University, Palo Alto, NY, 94304, United States Implementing socially responsible operational practices is becoming a priority for most organizations. Online platforms, if carefully designed, can be effective tools to implement such practices. We discuss two examples: a platform to increase transparency in government purchases (joint work with R. Beer and I. Rios), and a platform to increase traceability in the palm oil supply chain (joint work with S. Camelo, J de Zegher, and D. Iancu) 4 - When Bribes are Harmless: The Power and Limits of Collusion-resilient Mechanism Design Artur Gorokh, Cornell University, Ithaca, NY, United States, Siddhartha Banerjee, Krishnamurthy Iyer Many results in mechanism design break down when participating agents can collude. In particular, when monetary transfers are allowed between colluding agents, truthful revelation and efficiency are incompatible. We consider a relaxation for the problem, replacing truthful revelation with a property we call collusion dominance: all coalitions need to have dominant strategies. We prove an efficient, collusion-dominant mechanism exists for a large class of allocation problems that satisfy a surplus submodularity condition, and conversely, prove impossibilities when this condition fails. n TB18 North Bldg 128A

281