Supplier Behavior in Capacity Investment Competition: An Experimental Study

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• 作者：Shanshan Hu ; Zhixi Wan ; Qing Ye and Wei Chi
• 刊名：Production and Operations Management
• 出版年：2017
• 出版时间：February 2017
• 年：2017
• 卷：26
• 期：2
• 页码：273-291
• 全文大小：712K
• ISSN：1937-5956

文摘

Many manufacturers ensure supply capacity by using more than one supplier and sharing their capacity investment costs via supplier development programs. Their suppliers face competitive pressure from peers despite the reduced capacity investment cost. Although standard game theory makes clear prediction that cost sharing increases the suppliers' capacity choice and supply chain profit, the complex decision environment of capacity competition makes it interesting to test whether the theory predictions are robust and, if not, whether systematic deviations occur. We present a laboratory experiment study. The experiment data show that supplier subjects invested in higher capacities than what our theoretical analysis predicted, resulting in profit loss for the supply chain. Our econometric analysis indicates that the subjects are bounded rational and their concern for relative standing may be the potential driver of capacity over-investment. Based on the experimental findings, we study a modified cost-sharing mechanism that adapts to the behavioral biases. Its performance is validated in a second experiment.