Prashant Chintapalli | University of Western Ontario (original) (raw)

Papers by Prashant Chintapalli

Production and Operations Management, Jan 6, 2022

Besides using earmark budget to support farmer cost subsidies, governments in many developing cou... more Besides using earmark budget to support farmer cost subsidies, governments in many developing countries useminimum support price(MSP) as an alternative subsidy scheme to (i) safeguard farmers' incomes against vagaries in crop price and (ii) ensure sufficient crop production. Among different MSP schemes, we focus on thecredit‐basedMSP scheme under which a government will not take any possession of a crop; instead, it will credit farmers if the prevailing market price is below the prespecified MSP. In this paper, we consider a market consisting of infinitesimally small, rational, and strategic farmers (with heterogeneous production costs) who face market and yield uncertainties. Our equilibrium analysis reveals that (i) although both cost subsidy and MSP induce more production, cost subsidy leads to a higher crop production than MSP; (ii) MSP improves farmer's and consumer's surpluses; however, cost subsidy improves consumer's surplus but it can decrease farmer's surplus, which is unexpected; (iii) although both programs achieve the same optimal net value (i.e., sum of farmer's and consumer's surpluses minus shortage cost and expenditure), MSP always offers higher farmer's surplus than cost subsidy; and (iv) it is beneficial to invest only in cost subsidy, in both cost subsidy and MSP, and only in MSP, when the budget availability is low, moderate, and high, respectively, so that the net surplus (i.e., sum of farmer's and consumer's surpluses less the shortage cost) is also maximized along with the net value generated being maximized.

Social Science Research Network, 2021

Management Science, Nov 1, 2021

In many developing countries, crop minimum support price (MSP) is a subsidy scheme to (i) improve... more In many developing countries, crop minimum support price (MSP) is a subsidy scheme to (i) improve farmer welfare by safeguarding farmers’ incomes against vagaries in crop price and (ii) improve consumer surplus by ensuring sufficient crop production. Among different mechanisms to operationalize an MSP scheme, we focus on credit-based MSPs under which the government credits farmers should the prevailing market price be below the prespecified MSP. By accounting for the implementation cost of the MSP, we examine the effectiveness of the MSP in terms of net benefit (i.e., farmer’s surplus minus the implementation cost) and net social value (i.e., sum of farmer’s and consumer’s surpluses minus the implementation cost) in a market that consists of risk-averse farmers with heterogeneous production costs. Also, farmers face two types of uncertainties: (1) market and (2) production yield uncertainty. We find that a credit-based MSP can induce crop production, which is intuitive. However, we find some more interesting results: (i) offering a higher MSP may not improve farmer’s surplus, (ii) the net benefit of an MSP can be negative—the cost of offering an MSP can exceed the farmer’s surplus, and (iii) there exists an MSP that maximizes the net social value. We extend our single-crop model to the case of two crops to capture the intercrop MSP interaction. We show that when one crop is more rewarding but riskier than the other crop, then it is sufficient to offer an appropriate MSP for one of the two crops while offering no MSP to the other crop. This paper was accepted by Vishal Gaur, operations management.

The alarmingly increasing trends in worldwide waste generation call for a holistic analysis of wa... more The alarmingly increasing trends in worldwide waste generation call for a holistic analysis of waste management supply chains. Using a comprehensive end-to-end (i.e., waste generation to waste disposal) decision framework, this article analyzes key decisions of a waste management firm (WMF) focused on the proportions of dry (and wet) waste to recycle (and compost). This framework is applied to assess the impact of: (i) the preprocessing of generated waste at source (i.e., the "upstream factors") and (ii) the market prices of recycled dry and composted wet wastes (i.e., the "downstream factors") on WMF's decisions. One key insight is that the WMF will choose to process more waste when the market prices for processed wastes are high, and/or when more waste is preprocessed at source. Improvements in presorting can be more economical and offer a long-term sustainable solution to efficient waste management. From a policy perspective, we observe that taxing a WMF for waste disposal could dissuade the WMF from participating in waste processing especially when its marginal processing costs are high. The decision framework and the corresponding model are calibrated to different world regions using secondary data on these regions, classified by their income levels. It is observed from our data analysis that uniform "one-size-fits-all" policies are dominated by region-specific tailored policies for efficient waste management. Hence, prescriptions should be carefully formulated based on the type of waste generated and the processing/disposal options available in a region. For example, composting more wet waste at source is a better choice in low-, low-middle-, and middle-high-income regions, whereas this is not the case in high-income regions. The proposed decision framework also provides an explanation of the negative impact on recycling initiatives at a local level stemming from decreasing recycled material prices. Given that this is the first study to characterize and analyze the waste management supply chain, the article also highlights some areas for future research.

Annals of Operations Research, Nov 30, 2014

This study addresses the problem of combined pricing and inventory control in the context of peri... more This study addresses the problem of combined pricing and inventory control in the context of perishable goods-specifically, when demand is uncertain and price-sensitive and the consumers are free to choose between new and old units, based on the relative affordability of prices. First, the problem is formulated as a periodic review problem for a product with finite arbitrary lifetime and a myopic policy, which is often followed in practice, is discussed. Analytically it is shown that the solution obtained by the policy is also the unique solution that maximizes the individual profits from the inventories at each age. Next, this study addresses a special case-that of products with two-period lifetime, which is a scenario of practical importance. It is proven that under the policy of discounts and sticky pricing, which is often practiced in the brick-and-mortar retail stores, the myopic policy is in fact the steady-state optimal policy of the infinite-horizon problem. The study concludes with a numerical example and directions for future research in the area of joint pricing and inventory management of deteriorating, perishable products.

Social Science Research Network, 2017

This article has been accepted for publication and undergone full peer review but has not been th... more This article has been accepted for publication and undergone full peer review but has not been through the copyediting, typesetting, pagination and proofreading process, which may lead to differences between this version and the Version of Record. Please cite this article as

Journal of the Operational Research Society, Apr 1, 2016

In this study, we address the joint inventory and quality management in a Cournot duopoly, for a ... more In this study, we address the joint inventory and quality management in a Cournot duopoly, for a seasonally produced, perishable product whose quality deteriorates over time. The sales of the product occur over two periods, namely the season (first period) and the off-season (second period). Apart from the stocking quantities for the two periods, firms must decide the quality levels of the units to stock for the second selling period. Firms incur a cost to maintain particular quality levels. The equilibrium policies of the firms are characterized, and we discuss the impact of the firms’ quality costs on their inventory and quality decisions. We identify the conditions of the quality costs when competition ceases to exist in the second period, and analyse the impact of the quality costs on inter-temporal price fluctuations and product availability. Using the unconstrained equilibrium policy, we frame the firms’ inventory disposal policies when production yields are exogenous.

Production and Operations Management, Aug 21, 2017

T o avoid inventory risks, manufacturers often place rush orders with suppliers only after they r... more T o avoid inventory risks, manufacturers often place rush orders with suppliers only after they receive firm orders from their customers (retailers). Rush orders are costly to both parties because the supplier incurs higher production costs. We consider a situation where the supplier's production cost is reduced if the manufacturer can place some of its order in advance. In addition to the rush order contract with a pre-established price, we examine whether the supplier should offer advance-order discounts to encourage the manufacturer to place a portion of its order in advance, even though the manufacturer incurs some inventory risk. While the advance-order discount contract is Pareto-improving, our analysis shows that the discount contract cannot coordinate the supply chain. However, if the supplier imposes a pre-specified minimum order quantity requirement as a qualifier for the manufacturer to receive the advance-order discount, then such a combined contract can coordinate the supply chain. Furthermore, the combined contract enables the supplier to attain the first-best solution. We also explore a delegation contract that either party could propose. Under this contract, the manufacturer delegates the ordering and salvaging activities to the supplier in return for a discounted price on all units procured. We find the delegation contract coordinates the supply chain and is Pareto-improving. We extend our analysis to a setting where the suppliers capacity is limited for advance production but unlimited for rush orders. Our structural results obtained for the one-supplier-one-manufacturer case continue to hold when we have two manufacturers.

Social Science Research Network, 2015

When suppliers (i.e., contract manufacturers) fail to comply with environmental or safety regulat... more When suppliers (i.e., contract manufacturers) fail to comply with environmental or safety regulations, several non-governmental agencies and consumer activists put pressure on the buyers (customers) to take necessary actions to improve supplier compliance. Due to concerns over negative image and public boycotts, many buyers are conducting costly audits to improve supplier compliance. By considering a common practice that calls for independent audits (i.e., each buyer performs its own audit) as a benchmark, we examine the implications of two new audit mechanisms in this paper. The first mechanism is called the joint audit mechanism under which buyers conduct joint audits by sharing the joint audit cost and impose a collective penalty if the supplier fails their joint audit. The second mechanism is referred to as the shared audit mechanism under which each buyer conducts its own audit independently but shares its audit report with the other buyer. By sharing the audit reports, the buyers impose a collective penalty on the supplier if the supplier fails any one of the audits. Using a game-theoretic model with 2 buyers and 1 supplier, our analysis reveals that the joint audit mechanism is beneficial in two important ways. It can make the supplier increase its compliance level in equilibrium. Also, when the audit cost is below a certain threshold, the joint audit mechanism can increase the supply chain profit so that it is Pareto-improving. Moreover, we find that the shared audit mechanism is beneficial in a similar manner when the audit cost lies within a certain range. Ultimately, our analysis reveals that joint audits can be Pareto-improving when the buyer's audit cost is low, shared audits can be Pareto-improving when the buyer's cost is medium, and independent audits turn out to a practical mechanism when the buyer's audit cost is high.

Springer series in supply chain management, Dec 19, 2018

When suppliers (i.e., contract manufacturers) fail to comply with environmental or safety regulat... more When suppliers (i.e., contract manufacturers) fail to comply with environmental or safety regulations, several non-governmental agencies and consumer activists put pressure on the buyers (customers) to take necessary actions to improve supplier compliance. Due to concerns over negative image and public boycotts, many buyers conduct costly audits to improve supplier compliance. By considering a common practice that calls for independent audits (i.e., each buyer performs its own audit) as a benchmark, we examine the implications of joint audit mechanism arising from a buyer consortium. Under this mechanism buyers conduct joint audits by sharing the joint audit cost and impose a collective penalty on the supplier if the supplier fails their joint audit. We evaluate the efficacy of joint audits against the commonly practiced independent audits. Our analysis reveals that the joint audit mechanism is beneficial in two important ways. First, it can make the supplier increase its compliance level in equilibrium. Second, the joint audit mechanism can increase the supply chain profit when the audit cost is below a certain threshold.

Social Science Research Network, 2018

In many developing countries, governments often use Minimum support price (MSP) as a subsidy sche... more In many developing countries, governments often use Minimum support price (MSP) as a subsidy scheme to (i) safeguard farmers' income against vagaries in crop prices, and (ii) ensure sufficient production of different crops. While there are different mechanisms to operationalize the MSP scheme, we focus on the case when the government adopts the credit-based MSP scheme under which the government will not take any possession of the crop; instead, it will credit the farmer should the prevailing price be below the pre-specified MSP. We examine the effectiveness of MSP for achieving these two goals by consider a setting in which the market consists of two types of farmers (with heterogeneous production costs): myopic farmers (who make their crop selection and production decisions based on recent market prices) and strategic farmers (who make their decisions by taking all other farmers' decisions into consideration). By examining the dynamic interactions among these farmers for the case when there are two (complementary or substitutable) crops for each farmer to select to grow, we obtain the following results. First, the total production quantity of a crop is increasing in the MSP of that crop. Second, by setting the MSP of a crop too low, farmers' earnings for growing that crop can be lower than the case of no MSP. Third, relative to the case without MSP, it is possible for the government to choose the MSPs carefully to ensure Pareto improvements for all farmers. Fourth, farmers can attain a higher surplus when the government offers MSPs for complementary instead of substitutable crops.

Social Science Research Network, 2023

Manufacturing & Service Operations Management, May 1, 2018

Authors are encouraged to submit new papers to INFORMS journals by means of a style file template... more Authors are encouraged to submit new papers to INFORMS journals by means of a style file template, which includes the journal title. However, use of a template does not certify that the paper has been accepted for publication in the named journal. INFORMS journal templates are for the exclusive purpose of submitting to an INFORMS journal and should not be used to distribute the papers in print or online or to submit the papers to another publication.

Springer series in supply chain management, Feb 24, 2012

Social Science Research Network, 2022

Social Science Research Network, 2020

In many developing countries, crop Minimum support price (MSP) is a subsidy scheme to: (i) improv... more In many developing countries, crop Minimum support price (MSP) is a subsidy scheme to: (i) improve farmer welfare by safeguarding farmers' incomes against vagaries in crop price, and (ii) improve consumer surplus by ensuring sufficient crop production. Among different mechanisms to ope-rationalize an MSP scheme, we focus on credit-based MSPs under which government will credit farmers should the prevailing market price be below the pre-specified MSP. By accounting for the implementation cost of MSP we examine the effectiveness of MSP in terms of net benefit (i.e., farmer's surplus minus the implementation cost) and net social value (i.e., sum of farmer's and consumer's surpluses minus the implementation cost) in a market that consists of risk-averse farmers with heterogeneous production costs. Also, farmers face two types of uncertainties: (1) market uncertainty and (2) production yield uncertainty. We find that a credit-based MSP can induce crop production, which is intuitive. However, we find some more interesting results: (i) offering a higher MSP may not improve farmer's surplus, (ii) the {net benefit of MSP can be negative: the cost of offering MSP can exceed farmer's surplus, and (iii) there exists an MSP that maximizes the {net social value. We extend our single crop model to the case of two crops to capture the inter-crop MSP interaction. We show that when one crop is more rewarding but riskier than the other crop, then it is sufficient to offer an appropriate MSP for one of the two crops, while offering no MSP to the other crop.

European Journal of Operational Research, Jul 1, 2022

Social Science Research Network, 2022

EURO journal on computational optimization, Sep 1, 2021

Abstract We address the combined problem of supplier (or vendor) selection and ordering decision ... more Abstract We address the combined problem of supplier (or vendor) selection and ordering decision when a buyer can choose to procure from multiple suppliers whose yields are uncertain and potentially correlated. We model this problem as a stochastic program with recourse in which the buyer purchases from the suppliers in the first period and, if needed, chooses to purchase from the spot market or from the suppliers with excess supply, whichever is beneficial, in the second period in order to meet the target procurement quantity. We solve the above problem using sample average approximation (SAA) technique that enables us to solve the problem easily in practice. We compare the performance of our solution with the certainty equivalent problem, which is practiced widely and which we use as the benchmark, to evaluate the efficacy of our approach. Next, we extend our model to incorporate buyer’s risk aversion with respect to the quantity procured. We reformulate the multi-sourcing problem as a mixed integer linear program (MILP) and adopt a statistical approach to account for buyer’s risk aversion. Thus, we design a simple computational technique that provides an optimal sourcing policy from a set of suppliers when each supplier’s yield is uncertain with a generic probability distribution.

When suppliers (i.e., contract manufacturers) fail to comply with health and safety regulations, ... more When suppliers (i.e., contract manufacturers) fail to comply with health and safety regulations, buyers (retailers) are compelled to improve supplier compliance by conducting audits and imposing penalties. As a benchmark, we first consider the independent audit-penalty mechanism in which the buyers conduct their respective audits and impose penalties independently. We then examine the implications of two new audit-penalty mechanisms that entail a collective penalty. The first is the joint mechanism under which buyers conduct audits jointly, share the total audit cost incurred, and impose a collective penalty if the supplier fails their joint audit. The second is the shared mechanism in which each buyer conducts audits independently, shares its audit reports with the other buyers, and imposes a collective penalty if the supplier fails any one of the audits. Using a simultaneous move game-theoretic model with 2 buyers and 1 supplier, our analysis reveals that both the joint and the shared mechanisms are beneficial in several ways. First, when the wholesale price is exogenously given, we establish the following analytical results for the joint mechanism in comparison to the independent mechanism: (a) the supplier's compliance level is higher; (b) the supplier's profit is lower while the buyers' profits are higher; and (c) when the buyers' damage cost is high, the joint audit mechanism creates supply chain value so the buyers can offer an appropriate 1 transfer-payment to make the supplier better off. Second, for the shared audit mechanism we establish similar results but under more restrictive conditions. Finally, when the wholesale price is endogenously determined by the buyers, our numerical analysis shows that the above key results continue to hold.

Production and Operations Management, Jan 6, 2022

Besides using earmark budget to support farmer cost subsidies, governments in many developing cou... more Besides using earmark budget to support farmer cost subsidies, governments in many developing countries useminimum support price(MSP) as an alternative subsidy scheme to (i) safeguard farmers' incomes against vagaries in crop price and (ii) ensure sufficient crop production. Among different MSP schemes, we focus on thecredit‐basedMSP scheme under which a government will not take any possession of a crop; instead, it will credit farmers if the prevailing market price is below the prespecified MSP. In this paper, we consider a market consisting of infinitesimally small, rational, and strategic farmers (with heterogeneous production costs) who face market and yield uncertainties. Our equilibrium analysis reveals that (i) although both cost subsidy and MSP induce more production, cost subsidy leads to a higher crop production than MSP; (ii) MSP improves farmer's and consumer's surpluses; however, cost subsidy improves consumer's surplus but it can decrease farmer's surplus, which is unexpected; (iii) although both programs achieve the same optimal net value (i.e., sum of farmer's and consumer's surpluses minus shortage cost and expenditure), MSP always offers higher farmer's surplus than cost subsidy; and (iv) it is beneficial to invest only in cost subsidy, in both cost subsidy and MSP, and only in MSP, when the budget availability is low, moderate, and high, respectively, so that the net surplus (i.e., sum of farmer's and consumer's surpluses less the shortage cost) is also maximized along with the net value generated being maximized.

Social Science Research Network, 2021

Management Science, Nov 1, 2021

In many developing countries, crop minimum support price (MSP) is a subsidy scheme to (i) improve... more In many developing countries, crop minimum support price (MSP) is a subsidy scheme to (i) improve farmer welfare by safeguarding farmers’ incomes against vagaries in crop price and (ii) improve consumer surplus by ensuring sufficient crop production. Among different mechanisms to operationalize an MSP scheme, we focus on credit-based MSPs under which the government credits farmers should the prevailing market price be below the prespecified MSP. By accounting for the implementation cost of the MSP, we examine the effectiveness of the MSP in terms of net benefit (i.e., farmer’s surplus minus the implementation cost) and net social value (i.e., sum of farmer’s and consumer’s surpluses minus the implementation cost) in a market that consists of risk-averse farmers with heterogeneous production costs. Also, farmers face two types of uncertainties: (1) market and (2) production yield uncertainty. We find that a credit-based MSP can induce crop production, which is intuitive. However, we find some more interesting results: (i) offering a higher MSP may not improve farmer’s surplus, (ii) the net benefit of an MSP can be negative—the cost of offering an MSP can exceed the farmer’s surplus, and (iii) there exists an MSP that maximizes the net social value. We extend our single-crop model to the case of two crops to capture the intercrop MSP interaction. We show that when one crop is more rewarding but riskier than the other crop, then it is sufficient to offer an appropriate MSP for one of the two crops while offering no MSP to the other crop. This paper was accepted by Vishal Gaur, operations management.

The alarmingly increasing trends in worldwide waste generation call for a holistic analysis of wa... more The alarmingly increasing trends in worldwide waste generation call for a holistic analysis of waste management supply chains. Using a comprehensive end-to-end (i.e., waste generation to waste disposal) decision framework, this article analyzes key decisions of a waste management firm (WMF) focused on the proportions of dry (and wet) waste to recycle (and compost). This framework is applied to assess the impact of: (i) the preprocessing of generated waste at source (i.e., the "upstream factors") and (ii) the market prices of recycled dry and composted wet wastes (i.e., the "downstream factors") on WMF's decisions. One key insight is that the WMF will choose to process more waste when the market prices for processed wastes are high, and/or when more waste is preprocessed at source. Improvements in presorting can be more economical and offer a long-term sustainable solution to efficient waste management. From a policy perspective, we observe that taxing a WMF for waste disposal could dissuade the WMF from participating in waste processing especially when its marginal processing costs are high. The decision framework and the corresponding model are calibrated to different world regions using secondary data on these regions, classified by their income levels. It is observed from our data analysis that uniform "one-size-fits-all" policies are dominated by region-specific tailored policies for efficient waste management. Hence, prescriptions should be carefully formulated based on the type of waste generated and the processing/disposal options available in a region. For example, composting more wet waste at source is a better choice in low-, low-middle-, and middle-high-income regions, whereas this is not the case in high-income regions. The proposed decision framework also provides an explanation of the negative impact on recycling initiatives at a local level stemming from decreasing recycled material prices. Given that this is the first study to characterize and analyze the waste management supply chain, the article also highlights some areas for future research.

Annals of Operations Research, Nov 30, 2014

This study addresses the problem of combined pricing and inventory control in the context of peri... more This study addresses the problem of combined pricing and inventory control in the context of perishable goods-specifically, when demand is uncertain and price-sensitive and the consumers are free to choose between new and old units, based on the relative affordability of prices. First, the problem is formulated as a periodic review problem for a product with finite arbitrary lifetime and a myopic policy, which is often followed in practice, is discussed. Analytically it is shown that the solution obtained by the policy is also the unique solution that maximizes the individual profits from the inventories at each age. Next, this study addresses a special case-that of products with two-period lifetime, which is a scenario of practical importance. It is proven that under the policy of discounts and sticky pricing, which is often practiced in the brick-and-mortar retail stores, the myopic policy is in fact the steady-state optimal policy of the infinite-horizon problem. The study concludes with a numerical example and directions for future research in the area of joint pricing and inventory management of deteriorating, perishable products.

Social Science Research Network, 2017

This article has been accepted for publication and undergone full peer review but has not been th... more This article has been accepted for publication and undergone full peer review but has not been through the copyediting, typesetting, pagination and proofreading process, which may lead to differences between this version and the Version of Record. Please cite this article as

Journal of the Operational Research Society, Apr 1, 2016

In this study, we address the joint inventory and quality management in a Cournot duopoly, for a ... more In this study, we address the joint inventory and quality management in a Cournot duopoly, for a seasonally produced, perishable product whose quality deteriorates over time. The sales of the product occur over two periods, namely the season (first period) and the off-season (second period). Apart from the stocking quantities for the two periods, firms must decide the quality levels of the units to stock for the second selling period. Firms incur a cost to maintain particular quality levels. The equilibrium policies of the firms are characterized, and we discuss the impact of the firms’ quality costs on their inventory and quality decisions. We identify the conditions of the quality costs when competition ceases to exist in the second period, and analyse the impact of the quality costs on inter-temporal price fluctuations and product availability. Using the unconstrained equilibrium policy, we frame the firms’ inventory disposal policies when production yields are exogenous.

Production and Operations Management, Aug 21, 2017

T o avoid inventory risks, manufacturers often place rush orders with suppliers only after they r... more T o avoid inventory risks, manufacturers often place rush orders with suppliers only after they receive firm orders from their customers (retailers). Rush orders are costly to both parties because the supplier incurs higher production costs. We consider a situation where the supplier's production cost is reduced if the manufacturer can place some of its order in advance. In addition to the rush order contract with a pre-established price, we examine whether the supplier should offer advance-order discounts to encourage the manufacturer to place a portion of its order in advance, even though the manufacturer incurs some inventory risk. While the advance-order discount contract is Pareto-improving, our analysis shows that the discount contract cannot coordinate the supply chain. However, if the supplier imposes a pre-specified minimum order quantity requirement as a qualifier for the manufacturer to receive the advance-order discount, then such a combined contract can coordinate the supply chain. Furthermore, the combined contract enables the supplier to attain the first-best solution. We also explore a delegation contract that either party could propose. Under this contract, the manufacturer delegates the ordering and salvaging activities to the supplier in return for a discounted price on all units procured. We find the delegation contract coordinates the supply chain and is Pareto-improving. We extend our analysis to a setting where the suppliers capacity is limited for advance production but unlimited for rush orders. Our structural results obtained for the one-supplier-one-manufacturer case continue to hold when we have two manufacturers.

Social Science Research Network, 2015

When suppliers (i.e., contract manufacturers) fail to comply with environmental or safety regulat... more When suppliers (i.e., contract manufacturers) fail to comply with environmental or safety regulations, several non-governmental agencies and consumer activists put pressure on the buyers (customers) to take necessary actions to improve supplier compliance. Due to concerns over negative image and public boycotts, many buyers are conducting costly audits to improve supplier compliance. By considering a common practice that calls for independent audits (i.e., each buyer performs its own audit) as a benchmark, we examine the implications of two new audit mechanisms in this paper. The first mechanism is called the joint audit mechanism under which buyers conduct joint audits by sharing the joint audit cost and impose a collective penalty if the supplier fails their joint audit. The second mechanism is referred to as the shared audit mechanism under which each buyer conducts its own audit independently but shares its audit report with the other buyer. By sharing the audit reports, the buyers impose a collective penalty on the supplier if the supplier fails any one of the audits. Using a game-theoretic model with 2 buyers and 1 supplier, our analysis reveals that the joint audit mechanism is beneficial in two important ways. It can make the supplier increase its compliance level in equilibrium. Also, when the audit cost is below a certain threshold, the joint audit mechanism can increase the supply chain profit so that it is Pareto-improving. Moreover, we find that the shared audit mechanism is beneficial in a similar manner when the audit cost lies within a certain range. Ultimately, our analysis reveals that joint audits can be Pareto-improving when the buyer's audit cost is low, shared audits can be Pareto-improving when the buyer's cost is medium, and independent audits turn out to a practical mechanism when the buyer's audit cost is high.

Springer series in supply chain management, Dec 19, 2018

When suppliers (i.e., contract manufacturers) fail to comply with environmental or safety regulat... more When suppliers (i.e., contract manufacturers) fail to comply with environmental or safety regulations, several non-governmental agencies and consumer activists put pressure on the buyers (customers) to take necessary actions to improve supplier compliance. Due to concerns over negative image and public boycotts, many buyers conduct costly audits to improve supplier compliance. By considering a common practice that calls for independent audits (i.e., each buyer performs its own audit) as a benchmark, we examine the implications of joint audit mechanism arising from a buyer consortium. Under this mechanism buyers conduct joint audits by sharing the joint audit cost and impose a collective penalty on the supplier if the supplier fails their joint audit. We evaluate the efficacy of joint audits against the commonly practiced independent audits. Our analysis reveals that the joint audit mechanism is beneficial in two important ways. First, it can make the supplier increase its compliance level in equilibrium. Second, the joint audit mechanism can increase the supply chain profit when the audit cost is below a certain threshold.

Social Science Research Network, 2018

In many developing countries, governments often use Minimum support price (MSP) as a subsidy sche... more In many developing countries, governments often use Minimum support price (MSP) as a subsidy scheme to (i) safeguard farmers' income against vagaries in crop prices, and (ii) ensure sufficient production of different crops. While there are different mechanisms to operationalize the MSP scheme, we focus on the case when the government adopts the credit-based MSP scheme under which the government will not take any possession of the crop; instead, it will credit the farmer should the prevailing price be below the pre-specified MSP. We examine the effectiveness of MSP for achieving these two goals by consider a setting in which the market consists of two types of farmers (with heterogeneous production costs): myopic farmers (who make their crop selection and production decisions based on recent market prices) and strategic farmers (who make their decisions by taking all other farmers' decisions into consideration). By examining the dynamic interactions among these farmers for the case when there are two (complementary or substitutable) crops for each farmer to select to grow, we obtain the following results. First, the total production quantity of a crop is increasing in the MSP of that crop. Second, by setting the MSP of a crop too low, farmers' earnings for growing that crop can be lower than the case of no MSP. Third, relative to the case without MSP, it is possible for the government to choose the MSPs carefully to ensure Pareto improvements for all farmers. Fourth, farmers can attain a higher surplus when the government offers MSPs for complementary instead of substitutable crops.

Social Science Research Network, 2023

Manufacturing & Service Operations Management, May 1, 2018

Authors are encouraged to submit new papers to INFORMS journals by means of a style file template... more Authors are encouraged to submit new papers to INFORMS journals by means of a style file template, which includes the journal title. However, use of a template does not certify that the paper has been accepted for publication in the named journal. INFORMS journal templates are for the exclusive purpose of submitting to an INFORMS journal and should not be used to distribute the papers in print or online or to submit the papers to another publication.

Springer series in supply chain management, Feb 24, 2012

Social Science Research Network, 2022

Social Science Research Network, 2020

In many developing countries, crop Minimum support price (MSP) is a subsidy scheme to: (i) improv... more In many developing countries, crop Minimum support price (MSP) is a subsidy scheme to: (i) improve farmer welfare by safeguarding farmers' incomes against vagaries in crop price, and (ii) improve consumer surplus by ensuring sufficient crop production. Among different mechanisms to ope-rationalize an MSP scheme, we focus on credit-based MSPs under which government will credit farmers should the prevailing market price be below the pre-specified MSP. By accounting for the implementation cost of MSP we examine the effectiveness of MSP in terms of net benefit (i.e., farmer's surplus minus the implementation cost) and net social value (i.e., sum of farmer's and consumer's surpluses minus the implementation cost) in a market that consists of risk-averse farmers with heterogeneous production costs. Also, farmers face two types of uncertainties: (1) market uncertainty and (2) production yield uncertainty. We find that a credit-based MSP can induce crop production, which is intuitive. However, we find some more interesting results: (i) offering a higher MSP may not improve farmer's surplus, (ii) the {net benefit of MSP can be negative: the cost of offering MSP can exceed farmer's surplus, and (iii) there exists an MSP that maximizes the {net social value. We extend our single crop model to the case of two crops to capture the inter-crop MSP interaction. We show that when one crop is more rewarding but riskier than the other crop, then it is sufficient to offer an appropriate MSP for one of the two crops, while offering no MSP to the other crop.

European Journal of Operational Research, Jul 1, 2022

Social Science Research Network, 2022

EURO journal on computational optimization, Sep 1, 2021

Abstract We address the combined problem of supplier (or vendor) selection and ordering decision ... more Abstract We address the combined problem of supplier (or vendor) selection and ordering decision when a buyer can choose to procure from multiple suppliers whose yields are uncertain and potentially correlated. We model this problem as a stochastic program with recourse in which the buyer purchases from the suppliers in the first period and, if needed, chooses to purchase from the spot market or from the suppliers with excess supply, whichever is beneficial, in the second period in order to meet the target procurement quantity. We solve the above problem using sample average approximation (SAA) technique that enables us to solve the problem easily in practice. We compare the performance of our solution with the certainty equivalent problem, which is practiced widely and which we use as the benchmark, to evaluate the efficacy of our approach. Next, we extend our model to incorporate buyer’s risk aversion with respect to the quantity procured. We reformulate the multi-sourcing problem as a mixed integer linear program (MILP) and adopt a statistical approach to account for buyer’s risk aversion. Thus, we design a simple computational technique that provides an optimal sourcing policy from a set of suppliers when each supplier’s yield is uncertain with a generic probability distribution.

When suppliers (i.e., contract manufacturers) fail to comply with health and safety regulations, ... more When suppliers (i.e., contract manufacturers) fail to comply with health and safety regulations, buyers (retailers) are compelled to improve supplier compliance by conducting audits and imposing penalties. As a benchmark, we first consider the independent audit-penalty mechanism in which the buyers conduct their respective audits and impose penalties independently. We then examine the implications of two new audit-penalty mechanisms that entail a collective penalty. The first is the joint mechanism under which buyers conduct audits jointly, share the total audit cost incurred, and impose a collective penalty if the supplier fails their joint audit. The second is the shared mechanism in which each buyer conducts audits independently, shares its audit reports with the other buyers, and imposes a collective penalty if the supplier fails any one of the audits. Using a simultaneous move game-theoretic model with 2 buyers and 1 supplier, our analysis reveals that both the joint and the shared mechanisms are beneficial in several ways. First, when the wholesale price is exogenously given, we establish the following analytical results for the joint mechanism in comparison to the independent mechanism: (a) the supplier's compliance level is higher; (b) the supplier's profit is lower while the buyers' profits are higher; and (c) when the buyers' damage cost is high, the joint audit mechanism creates supply chain value so the buyers can offer an appropriate 1 transfer-payment to make the supplier better off. Second, for the shared audit mechanism we establish similar results but under more restrictive conditions. Finally, when the wholesale price is endogenously determined by the buyers, our numerical analysis shows that the above key results continue to hold.