Prof. Jinxing Xie
Tsinghua University
Talk:
Manipulating a retailer with private information on loss aversion
Abstract:
We consider a supply chain consisting of a risk neutral manufacturer and a loss averse retailer who possesses private information on its degree of loss aversion. In such a supply chain, the retailer has incentive to exaggerate its degree of loss aversion under traditional contracts (e.g. the wholesale price contract), which leads the manufacturer to make decisions based upon its prior belief over the retailer’s degree of loss aversion and causes loss to the manufacturer. To avoid retailer’s exaggerating its degree of loss aversion and ensure credible information sharing, we propose a nonlinear profit sharing (NPS) scheme. We show that properly designed NPS scheme can elicit truthful information on the retailer’s degree of loss aversion, while maximizing the manufacturer’s expected profit and ensuring the retailer’s participating. We also show that the NPS scheme can achieve almost full system efficiency as long as the lower bound for the wholesale price is low enough. Numerical analysis demonstrates that in comparison with the wholesale price contract, the NPS scheme can significantly improve average profits for both the manufacturer and the whole supply chain. We also investigate how the improvement of the NPS scheme over the wholesale price contract changes with the supply chain parameters. (This is a joint work with PhD students Huachun Xiong and Xiaoxue Deng of Tsinghua University.)
Biography:
Dr. Jinxing Xie is currently a professor at the Department of Mathematical Sciences, Tsinghua University, Beijing, China. He received his BSc in Applied Mathematics in 1988 and his Ph.D. in Computational Mathematics in 1995, both from Tsinghua University. He has the experience of working at Shanghai Baoshan Steel Group as a production planning and scheduling engineer for two years (1998-1990). His current research interests lie in the field of Behavioral Operations Management, Logistics and Supply Chain Management, and Production Planning and Scheduling. He has published more than 25 papers in peer-reviewed international journals such as Operations Research, Operations Research Letters, Decision Sciences, Production and Operations Management, European Journal of Operations Research, etc.
