Informs Annual Meeting Phoenix 2018

INFORMS Phoenix – 2018

TD53

seasonality) of the time series instead of directly selecting a model from a choice set. 2 - The Behavioral Promise and Pitfalls in Compensating Store Managers Shan Li, City University of New York, Baruch College, 55 Lexington Avenue, New York, NY, 10010, United States, Kay-Yut Chen, Ying Rong We theoretically and behaviorally studied profit-sharing and target-with-bonus compensation schemes in an inventory management context. Our experimental data reveals behavioral promise and pitfalls of the two widely used incentive compensation schemes, and it further suggests systematic deviations from the theoretical benchmarks. Based on the experimental findings, we manipulate the behaviors and engineer the design of the compensation scheme through two additional treatments, to explore potential improvement of the mechanism. Our results have implications for the design of incentive schemes in practice. 3 - How Supply Chain Risks Influence Supplier Selection and Ordering Decisions: A Behavioral Investigation Vincent (Junhao) Yu, University of Minnesota, Minneapolis, MN, United States, Karen L. Donohue Various types of risks occur in business supply chains. When choosing suppliers, buyers need to carefully evaluate the risk and cost profiles of the candidates in order to make appropriate ordering decisions. In this study, we combine modeling and experimental methods to investigate buyer ordering behavior when facing suppliers with different types and levels of risks. Potential risks include reliability- related issues that disrupt the flow of supply and responsibility-related issues that influence the flow of customer demand. Our findings provide insights for supply chain professionals looking to better understand the behavioral biases that enter into their sourcing decisions. 4 - Wage Transparency in Sales Agents’ Compensation Schemes Xiaoyang Long, University of Wisconsin-Madison, Wisconsin School of Business, 975 University Avenue, Madison, WI, 53706, United States, Javad Nasiry Sales agents with social preferences evaluate their pay in comparison with their peers’ and experience a positive or negative utility. We characterize the optimal salesforce compensation schemes in this context and identify the conditions under which wage transparency benefits the firm. n TD55 North Bldg 232C Decentralized Innovation Emerging Topic: New Product Development Emerging Topic Session Chair: Sreekumar Bhaskaran, SMU 1 - Strategic Investment in a Budget Constrained Firm’s R&D We model a bilateral monopolistic supply chain in which a supplier’s sales are linked with a manufacturer’s costly R&D. The manufacturer has a limited budget for R&D. The supplier can influence the manufacturer’s R&D spending by setting the wholesale price and/or investing in R&D. We find that if the budget is common information, the manufacturer’s profit can decrease in its budget, leading the manufacturer to hide the R&D budget. To overcome this information distortion, we develop a simple and implementable threshold policy based on mechanism design. The separating equilibrium can be obtained with fewer structural assumptions about the suppliers prior belief about the budget. 2 - Outsourcing and Offshoring in Complex Product Development Projects Jurgen Mihm, INSEAD, Boulevard de Constance, 77305, France, Ole Frauen, Arnd H. Huchzermeier Large organizations that develop complex products are faced with the question of how to decompose and allocate product development work across geographic, or organizational boundaries. Distributing work may offer immense time and cost savings. However, finding a good allocation of work packages to development entities continues to be a challenge for many companies in practice. Based on an extensive data set involving all development projects of one of the largest car manufacturers worldwide, we provide insight into how to best offshore and outsource product development. 3 - Firm Clockspeed: Toward a Theory of Relativity Sina Moghadas Khorasani, Student, University of Utah, Salt Lake City, UT, United States, Glen M. Schmidt Intel runs perceptively fast compared to Pfizer (its revenues stem from new products, product lifespans are short, and cost reduction is rapid), yet profit growth is no higher. In this paper, we explore how perceived clockspeed contributes to profit growth (we call this relative clockspeed) and economic progress (we call this absolute clockspeed). Junghee Lee, Assistant Professor, Tulane University, 7 McAlister Dr, New Orleans, LA, 70118, United States

n TD53 North Bldg 232A Mechanism Design Sponsored: Auction and Marketing Design Sponsored Session Chair: Brian Baisa, Amherst, MA, 01002, United States 1 - Dominant Strategy Implementation without Quasilinearity Brian Baisa, Amherst College, Converse Hall, Office 211, Amherst, MA, 01002, United States I study dominant strategy implementation in a private value setting where agents have non-quasilinear preferences. I show that a mechanism is dominant strategy implementable if and only if the mechanism is ex post implementable in a particular endogenously determined interdependent value quasilinear setting . A corollary of this result is that there is no efficient and dominant strategy implementable mechanism for auction settings where bidders have multi-unit demands and multi-dimensional types. 2 - Auctions versus Negotiations and Information Revelation Justin Burkett, Wake Forest University, 1834 Wake Forest Road, Department of Economics, Winston-Salem, NC, 27106, United States, Kyle Woodward We consider a seller deciding whether to implement an auction or engage in sequential negotiations with potential buyers. We show that sellers generally prefer auctions to negotiations. In equilibrium, as in reality, bidders in either mechanism use jump bids to signal strength to their competitors. The seller’s preference is robust to different assumptions about bidder entry, as well as to the introduction of entry costs. Compared to prior work, we argue that the equilibrium of our model aligns better with observed behavior (e.g., bidders use jump bids in both auctions and negotiations) and gives a clearer and more robust justification for why a seller might prefer to run an auction. 3 - Contingent Payment Mechanisms for Resource Utilization Hongyao Ma, Harvard University, 33 Oxford Street, MD 242, Cambridge, MA, 02138, United States, Reshef Meir, David C. Parkes, James Zou We consider a multi-period assignment problem, where agents are uncertain whether or not they will have positive value for the future use of a resource, and where it is in the interest of the planner that resources be used and not wasted. We introduce the contingent payment mechanisms (CP), and show that when instantiated for a max penalty equal to the societal value for use of the resource, the CP mechanism is welfare optimal under a set of axiomatic properties. A special case of the CP mechanism maximizes utilization—- the probability that the resource is used. We extend the results to assign multiple resources, and present simulation results to demonstrate the effectiveness of the CP mechanisms. 4 - Non-exploitable Protocols for Repeated Cake Cutting Shai Vardi, Assistant Professor, Purdue University, 403 W. State Street, West Lafayette, IN, 47907, United States, Omer Tamuz, Juba Ziani We introduce the notion of exploitability in cut-and-choose protocols for repeated cake cutting. If a cut-and-choose protocol is repeated, the cutter can possibly gain information about the chooser from her previous actions, and exploit this information for her own gain, at the expense of the chooser. We show that there exist non-exploitable protocols that use a small number of cuts per day. Among our results are a non-adaptive non-exploitable protocol that uses 3 cuts per day on 2-dimensional cakes, and a separation between adaptive and non-adaptive protocols for 1-dimensional cakes. n TD54 North Bldg 232B Incentive and Process Design with Behavioral Considerations Sponsored: Behavioral Operations Management Sponsored Session Chair: Xiaoyang Long, University of Wisconsin-Madison, Madison, WI, 53706, United States 1 - Judgmental Selection of Forecasting Models Enno Siemsen, University of Wisconsin-Madison, Wisconsin School of Business, 975 University Avenue, Madison, WI, 53706, United States, Fotios Petropoulos, Nikolaos Kourentzes, Konstantinos Nikolopoulos In this paper, we explored how judgment can be used to improve the selection of a forecasting model. We compared the performance of judgmental model selection against a standard algorithm based on information criteria. We also examined the efficacy of a judgmentalmodel-build approach, in which experts were asked to decide on the existence of the structural components (trend and

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