Prof. Özalp ÖZER
The University of Texas at Dallas
Talk:
Forecast Information Sharing: The Role of Contracts, Behaviors and Timing
Abstract:
In this presentation, we will focus on the problem of a supplier soliciting forecast information from a manufacturer. We will show that a wholesale price contract leads to a forecast communication that is non-binding, non-verifiable and costless (also known as “cheap talk”). The unique equilibrium in this case is a “babbling” equilibrium in which the manufacturer has an incentive to exaggerate her forecast; hence the supplier has a reason to ignore the report, which often results in low profits and channel inefficiency. Contracts (structured agreements) affect forecast communication, the firms’ decisions and profits. Hence, they can be used to change firms’ self-interested, pecuniary payoffs to induce credible forecast sharing. We will show that a capacity reservation contract (constructed by a mechanism design) enables the supplier to screen the forecast information by requiring the manufacturer to make a monetary commitment to reserve capacity. Finally, we will take on a new perspective on contract design by considering the role of trust in forecast communication. Observations from human-subject experiments highlight that behavioral factors such as trust and trustworthiness play a critical role in forecast information sharing. Hence, we will propose a trust-embedded analytical model that will better explain the circumstances in which credible information sharing arises. Analytical models and behavioral observations will help us to determine which contract and forecast sharing strategy to adopt depending on key product and market characteristics. If time permits, we will investigate the supplier’s optimal time to offer a mechanism when the forecast information asymmetry among firms changes over time.
Biography:
Özalp Özer is an Associate Professor at The University of Texas at Dallas. Previously he was an Associate Professor at Columbia University and Stanford University. His general research interest is to investigate the impact of technology and information on product development, production, and distribution of goods and services, management and coordination of supply chains, and pricing management. He has received the Wickham Skinner Early-Career Research Accomplishment Award from the Production and Operations Management Society in 2004, and the Eugene Grant Teaching Award at Stanford by vote of students in 2003 and 2004 and at Columbia in 2009. His articles have appeared in journals such as Management Science, Operations Research, and Manufacturing & Service Operations Management. He is currently serving as an associate editor for journals such as Management Science, Operations Research and Production and Operations Management. He is an active consultant to industry and has consulted companies including Ericsson, General Motors, Hitachi GST, and Hewlett Packard. He received his Ph.D. and M.S. degrees from Columbia University.
