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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26273
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| Title: | Costly Enforcement of Quality Standards in Decentralized Supply Chains |
| Authors: | Sheopuri, Anshul
Zemel, Eitan |
| Issue Date: | 19-Feb-2008 |
| Publisher: | Stern School of Business, New York University |
| Series/Report no.: | OM-2008-01 |
| Abstract: | We consider a supply chain where the quality level can be observed by
the buyer(s) only after the purchase is completed (experience good). If
the delivered quality is below the levels agreed in the contract, the
buyer(s) may take action to seek remedy, but this effort is costly.
Obviously, this fact can be exploited by the seller. In the case of a
single buyer, we show that the buyer may not be motivated to appropriate
all the channel profits but, rather, is able to pay a higher purchase
price in order to induce the seller to provide higher quality. The set
of purchase prices that support trade split into different regions. We
identify regions where counterintuitive behavior is exhibited, for
example, the buyer prefers higher purchase price, while the seller
prefers lower purchase price. For the case of more than one buyer, we
examine and contrast the behavior of two remedy regimes: In the case of
individual enforcement, each buyer must work individually to enforce her
own quality. In the case of joint enforcement, all buyers benefit from
enforcement by a single buyer. We examine the externalities that arise
in this supply chain and identify how the market share, enforcement
costs and purchase price affect the quality level. |
| URI: | http://hdl.handle.net/2451/26273 |
| Appears in Collections: | IOMS: Operations Management Working Papers
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