Quality incentive contracts considering asymmetric product manufacturability information: Piece rate vs. Tournament

Gao, Jie; Fan, Huirong; Cao, Bin; Wang, Nengmin

doi:10.1016/j.cie.2020.106446

Cited by 9 publications

(7 citation statements)

References 42 publications

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“…Babica and Sceulovs [38] elaborated on the methods of innovation measurement and quality evaluation in public innovation procurement and designed a framework for evaluating the quantity and quality value of innovation proposals. Gao et al [17] established a game theory model to study quality-incentive contracts under symmetric and asymmetric product manufacturability information. Quality is often difficult to observe and measure in procurement [39,40]; thus, research on innovation quality needs to be further explored.…”

Section: Literature Reviewmentioning

confidence: 99%

“…It is difficult for the government to accurately grasp the type of technology of enterprises (ex-ante) and their efforts to improve quality (ex-post). Therefore, due to the adverse selection and moral hazard caused by information asymmetry between the government and enterprises, the design of a government incentive mechanism is crucial to sustainably improve the quality of public technology innovation [17].…”

Section: Introductionmentioning

confidence: 99%

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Sustainable Quality-Incentive Contract Design of Public Technology Innovation Procurement under Asymmetry Information

2023

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Public technology innovation procurement plays an essential role in alleviating current major social challenges. In the process of government procurement, the hidden adverse selection and moral hazard caused by the unobservable technology types and efforts of enterprises are not conducive to the sustainable improvement of technology innovation quality. To sustainably encourage enterprises to improve the quality of public technology innovation procurement, based on principal-agent and incentive regulation theories, this paper designs quality-incentive contracts under single- and dual-asymmetric information conditions. We discuss the impact of various relevant factors on contract design and the level of effort by solving and analyzing the model. Furthermore, we validate the effects of the proportion of enterprise technological type, the uncertainty of technological innovation, and the quality-benefit coefficient on the contract parameters and the expected profits of both parties through numerical simulation. The results show that under dual-asymmetry information, the government can motivate enterprises to realize self-selection and improve the quality of technological innovation by designing information screening contracts. The government’s revenue is closely related to the proportion of enterprises’ technology types in the market, and information rents can swamp the government’s expected revenues when the market proportion of high-type enterprises is small. The uncertainty of technological innovation will reduce the effort of enterprises and the incentive effect of the contract. The quality-benefit coefficients of the government and enterprises have different impacts on the intensity of contract incentives with higher quality-benefit coefficients of the government, therefore having better incentive effects for enterprises. The research conclusion provides a reference for the government to design a sustainable incentive contract to improve the quality of public technology innovation.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Sustainable Quality-Incentive Contract Design of Public Technology Innovation Procurement under Asymmetry Information

2023

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“…Firstly, for the quality incentive of products, Lewis T and Sappington (1991) developed two‐part tariffs procurement contracts and concluded several plausible conditions by comparative analysis, under which the optimal benefits of both the principal and agent were higher when the quality of products is verifiable. Baiman and Rajan (2001) and Gao et al (2020) assumed that the quality of the product depended on both the effort spent at the manufacturing stage and the manufacturability of this product determined by the design innovation, which affected the effect of effort. Then they proposed incentive‐compatible contracts to motivate the product quality.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Consistent with the existing research (Zhang & Xu, 2021), we assume the quality is affected by the effort level and technology level of the enterprise. Considering a higher technology level often makes the effort more efficient (Baiman & Rajan, 2001; Gao et al, 2020), we suppose that the expression of innovation quality satisfies

q ([] e ((), β), β) = italicβe ((), β) + ε

, where

ε

is a random disturbance term drowned on

N ((),, 0, σ^{2})

. Larger

σ^{2}

values indicate that the uncertainty in the innovation process is greater.…”

Section: The Modelmentioning

confidence: 99%

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Quality incentive contract design in government procurement for innovation

Wang

2022

Manage Decis Econ

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Recently, as supply‐side innovation incentive policies do not work well in China, demand‐side instruments, like the government procurement for innovation, are emphasized. However, as the enterprise may be better informed than the government about its initial technology level and effort, the government faces the dual information asymmetry of adverse selection and moral hazard in the process of procurement. Thus, in this paper, series of quality incentive contract models are proposed to illustrate how the government can identify the initial technology type of the enterprise and motivate it to exert effort to improve the innovation quality.

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Strategies in supply chain competition: A game theoretic approach

Patare

Venkataraman

2023

Computers & Industrial Engineering

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Quality incentive contracts considering asymmetric product manufacturability information: Piece rate vs. Tournament

Cited by 9 publications

References 42 publications

Sustainable Quality-Incentive Contract Design of Public Technology Innovation Procurement under Asymmetry Information

Sustainable Quality-Incentive Contract Design of Public Technology Innovation Procurement under Asymmetry Information

Quality incentive contract design in government procurement for innovation

Strategies in supply chain competition: A game theoretic approach

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