A Newsvendor Who Chooses Informational Effort

Marschak, Thomas; Shanthikumar, J. George; Zhou, Junjie

doi:10.1111/poms.12208

Cited by 13 publications

(11 citation statements)

References 52 publications

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“…For example, Gümüs (2014) studies the information sharing between competitive suppliers and a monopoly buyer and characterizes the condition where a credible information sharing is sustainable. Marschak et al (2015) study the information sharing between a forecaster and a newsvendor, and the impact of the forecaster's information gathering on the newsvendor's order quantity and sales quantity. Spiliotopoulou et al (2016) examine the coordination issue in a context where a central planner makes inventory decision while demand forecast information is from multiple regional managers.…”

Section: Literature Reviewmentioning

confidence: 99%

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Cry‐wolf syndrome in recommendation

Liang

2023

Production and Operations Management

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In this paper, we examine the effects of the cry‐wolf syndrome in a setting where a manufacturer hires a forecaster to make a recommendation on the capacity decision. In this context, we define cry wolf as a behavioral syndrome in which the manufacturer becomes less compliant with a forecaster's valuable recommendation after the forecaster's prior recommendation is known to be ex post nonoptimal. We find that, although the cry‐wolf syndrome unequivocally leads to lower performance for the manufacturer when the forecaster's forecast ability is exogenous, cry wolf can help boost the forecaster's investment in improving forecast ability when the ability can be endogenously determined by the forecaster and, thus, benefit the manufacturer. Moreover, cry wolf can improve the performance of the system—the manufacturer and forecaster together—when the commission that the manufacturer pays to the forecaster is not low. Our findings are helpful for understanding the conditions under which cry wolf can be detrimental or beneficial, and for indicating the need for caution with regard to actions curtailing the cry‐wolf syndrome among managers.

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Section: Literature Reviewmentioning

confidence: 99%

“…Marschak et al. (2015) study the information sharing between a forecaster and a newsvendor, and the impact of the forecaster's information gathering on the newsvendor's order quantity and sales quantity. Spiliotopoulou et al.…”

Section: Literature Reviewmentioning

confidence: 99%

Cry‐wolf syndrome in recommendation

Liang

2023

Production and Operations Management

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“…It is clear from this alternative definition that the Blackwell IS applies to the comparison of convex (or concave) functions. In our contracting problem, the supplier's payoff is a function of the retailer's optimal contingent order; unfortunately, both the optimal contingent order and the supplier's payoff are not convex (or concave) in general (see the remark in Section 1.1 of Marschak et al (2015) for a more detailed discussion).…”

Section: The Choice Of Ismentioning

confidence: 99%

“…For example, Taylor and Xiao (2010) used this IS to establish a convex impact of the IS. The normal IS is a special case of the location-scale IS that was first proposed by Marschak et al (2015) to examine how a newsvendor's profit, order and sales change with the IS quality. In this article, Marschak et al discussed in detail why the location-scale IS is the most appropriate IS to be used to analyze the newsvendor problem (see the first two sections of Marschak et al, 2015).…”

Section: The Choice Of Ismentioning

confidence: 99%

Supply chain coordination with information design

2022

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We consider the coordination of a supplier–retailer supply chain where, in addition to classical contract considerations, a supplier decides the adoption of an information structure (IS) for the supply chain, with a higher‐quality IS allowing the supply chain parties to obtain a more accurate demand forecast. Because a wholesale price contract cannot coordinate the supply chain due to misaligned incentives of supply chain parties, we explore what common coordinating contracts in the classical coordination literature can continue coordinating the supply chain with the IS adoption. Interestingly, our analysis appears to reveal the power of simplicity: some simple classical coordinating contracts (e.g., the buy‐back and revenue‐sharing contracts), though not designed with the IS consideration, still coordinate the supply chain, whereas other more complicated classical contracts (e.g., the quantity flexibility and sales rebate contracts) fail to do so. We derive a general condition for supply chain coordination and show that any contract with a newsvendor‐like transfer payment can coordinate the supply chain.

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“…We follow the lead of Marschak et al (2015) for Assumption 1 because doing so enables analytical tractability. Our main insights hold under various probability distribution functions, but analytical tractability is greatly curtailed (e.g., we numerically confirmed the robustness of our results under a normal distribution, as detailed in Online Appendix B.3).…”

Section: Model and Structural Propertiesmentioning

confidence: 99%

Managing Capital Market Frictions via Cost-Reduction Investments

Tanrısever

Joglekar

Erzurumlu

et al. 2021

M&SOM

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Problem definition: We examine how the presence of capital market frictions influences the decision to invest in production cost reduction and the resultant production volume. This investment can increase the firm’s cash flow by increasing the profit margin, but it can also decrease the firm’s risk-free cash reserves and thus affect its exposure to capital market frictions. Academic/practical relevance: Process improvement aimed at production cost reduction has generated myriad of theoretical questions about efficient investment options and capacity choices. From a managerial perspective, process improvement is a fundamental concern in operations strategy. Nevertheless, its analysis typically excludes financial constraints by assuming a perfect capital market. Methodology: We formulate a two-stage profit maximization model in which a capital-constrained firm commits to a cost-reduction investment in the first stage in anticipation of its production decision in the second stage of this two-stage decision process. The firm considers capital market frictions when making decisions at each stage, while considering uncertainty in demand for its offering and in reducing its unit production cost. Results: When a firm faces small initial capital and low preinvestment unit production costs, it can benefit from investing in production cost reduction in the presence of capital market frictions more so than in their absence. Moreover, uncertainty in the production cost reduction mitigates the impact of market frictions on the net benefit (i.e., additional profit), whereas demand uncertainty decreases the feasible parameter space, where investing in production cost reduction is optimal. Managerial implications: A firm’s decision to invest in production cost reduction affects its operational and financial capabilities. Managers should thus consider this investment as an operational hedge not only against the uncertainty of matching supply and demand but also against exposure to capital market frictions and the resultant financial risk.

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A Newsvendor Who Chooses Informational Effort

Cited by 13 publications

References 52 publications

Cry‐wolf syndrome in recommendation

Cry‐wolf syndrome in recommendation

Supply chain coordination with information design

Managing Capital Market Frictions via Cost-Reduction Investments

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