Effects of Demand, Cost, and Capacity Information Asymmetry
<-- Return to the list
Date: 11-21-2006
Start Time:
1:00pm
End Time: 2:00pm
Speaker: Izak Duenyas, University of Michigan
Location: Uris 333
Abstract
Most
operations management models assume
that decision makers have the same
information on their customers',
suppliers', or competitors' capacity,
demand and/or cost. In this talk, we
explore two models that explicitly
consider information asymmetry and
derive insights into how firms'
decisions change as a function of
the asymmetry. We first model a case
where an OEM is buying a part from a
unique supplier for assembling a
final product with two major
components; the one supplied by the
supplier and other one made by the
OEM. The OEM possesses private
information across two dimensions;
demand forecasts for the final
product as well as cost of
manufacturing the in-house
component. We characterize the
supplier's optimal menu of contracts
for the OEM and try to answer the
following fundamental question: When
the supplier has only one dimension
(Cost or demand) that he is
uncertain about, the OEM has no
incentive to reveal the information;
when the OEM has two dimensions of
private information, are there any
cases where the OEM benefits from
eliminating one dimension of his
private information; I.e., when is
less private information more
valuable?
Time permitting, we will also look
at a model with two competing firms
where the firms have information
asymmetry about each others'
capacity. The firms can reveal their
capacity through their production
decisions. We will explore if firms
have an incentive to hide their
capacity levels and when firms may
benefit from overproduction just to
reveal capacity for the benefit of
future periods.
Joint work with Dimitris Kostamis
and Qing Ye.
Bio
Izak Duenyas is John Psarouthakis Professor of manufacturing management and professor of operations and management science at the Ross School of Business, and also holds an appointment as a professor of industrial and operations engineering at the University of Michigan. He serves as an area editor for Operations Research in Manufacturing, Service and Supply Chain Operations, and as an associate editor for Management Science. He has published in journals such as Operations Research, Management Science and Advances in Applied Probability. He has won the Executive M.B.A. teaching award from students at the Ross School.