No abstract

Counterfeiting is a severe problem in many sectors. There are two types of counterfeits: non‐deceptive and deceptive. While both types are important business challenge, deceptive counterfeit has an additional negative impact—customers have a post‐purchase regret if they expect to purchase a real product but ended up with a fake. The focus of this study is on the setting that relates to deceptive counterfeits. Our paper is one of the first that examines the effectiveness of blockchain as a solution to a supply chain challenge. Specifically, the unique feature of blockchain that we model, which none of the traditional strategies studied in the literature is capable of, is that blockchain adoption changes the analysis from a deceptive counterfeit setting to a non‐deceptive counterfeit setting. We also consider government being a decision maker and customers' privacy concern from blockchain adoption, two features that are not examined in the existing literature. We consider a market with a manufacturer and a deceptive counterfeiter. The manufacturer can signal product authenticity either with blockchain technology or through pricing. The government can provide subsidy to encourage blockchain adoption. Blockchain should be used when the counterfeit quality is intermediate or when customers have intermediate distrust about products in the market. If government provides subsidy, blockchain can be more effective than differential pricing strategy in eliminating post‐purchase regret. Our results advocate for government providing subsidy because it benefits both customers and the society and could be a better approach than government enforcement efforts.

In this paper, we use a two-period game theoretical model to examine the decisions of a manufacturer and a copycat firm who are competing for strategic customers. The manufacturer decides on the amount of its market expansion advertising investment in the first period and on its pricing strategy in both periods. Advertising increases the “size of the pie,” but eventually the manufacturer may end up inadvertently sharing the benefits with the copycat. After the first period, the copycat makes a market-entry decision, and, if it opts to enter, it also decides on a pricing strategy. The customers are strategic, and they decide whether or not to buy, when to buy, and which product to buy. We find that, interestingly, lower quality levels of the manufacturer’s product may increase the manufacturer’s prices and profit. Moreover, the manufacturer may be worse off when customers are more likely to purchase its product immediately rather than wait for a price reduction or for the copycat’s product. Finally, the copycat may be worse off when customers withhold their purchases in the first period in anticipation of the possibility of copycat product becoming available in a later period. The online appendix is available at https://doi.org/10.1287/msom.2016.0613 .

We consider the outsourcing strategy problem of two competing original equipment manufacturers (OEMs) whose products are each made up of two components. The OEMs have different specializations, and therefore the component that each firm can produce in-house is different. Each firm must decide whether to outsource the other component to the competing OEM or to a third-party supplier. Prior research has demonstrated that competitors can be better off cooperating as supply-chain partners; therefore, one might expect that, as long as the OEMs are not at a severe cost disadvantage, they should maximize their cooperation as supply-chain partners, especially when competition between products is strong. Interestingly, this study finds that more cooperation between competitors may actually be harmful. Under certain conditions, while one of the OEMs should outsource to the competing firm, the other should outsource to a third-party supplier, even when the third-party supplier is more expensive and the competition is intense.

Original equipment manufacturers increasingly involve suppliers in new product development (NPD) projects. How companies design a contract to motivate supplier participation is an important but under‐examined empirical question. Analytical studies have started to examine the optimal contract that aligns buyer‐supplier incentives in joint NPD projects, but empirical evidence is scarce about the actual contracts offered by buying companies. Bridging the analytical and empirical literature, this paper compares optimal contracting derived from a parsimonious analytical model with actual behaviors observed in an experiment. In particular, we focus on how project uncertainty, buying company effort share, and buyer risk aversion influence three contractual decisions: total investment level, revenue share and fixed fee. Our results indicate significant differences between the optimal and actual behaviors. We identify various types of non‐optimal contractual behaviors, which we explain from a risk aversion as well as a bounded rationality perspective. Overall, our findings contribute to the literature by showing that (1) the actual contractual behaviors could differ significantly from the optimal ones, (2) the actual contract design is sensitive to changes in project uncertainty and buying company effort share, and (3) the significant roles of risk aversion and bounded rationality in explaining the non‐optimal contractual behaviors.