Optimal outsourcing strategies under uncertainty
- This thesis includes two essays on outsourcing in the presence of uncertainty. The first concerns physical goods and multi-tier supply chains whereas the second discusses the outsourcing of innovation in the context of dynamic contests. In Chapter 2 we study multi-tier supply chain networks in the presence of disruption risk. Firms decide on how to source their inputs from upstream suppliers so as to maximize their expected profits, and prices of intermediate goods are set so that markets clear. We establish that a supply equilibrium exists and provide an explicit characterization of the equilibrium prices, profits, and sourcing decisions. Our characterization allows us to derive insights on how the network structure, i.e., the number of firms in each tier, production costs, and disruption risk affect firms' profits and the prices of intermediate goods. Furthermore, we establish that networks that maximize consumer surplus and aggregate profits for the supply chain are structurally different. In particular, the former have relatively less diversified downstream tiers and generate more variable output than the latter. Finally, we study the question of endogenous chain formation by considering a game of entry, i.e., firms decide whether to engage in production by forming beliefs about their profits in the post-entry supply chain. We argue that endogenous entry leads to chains that are inefficient in terms of the number of firms that engage in production. Chapter 3 studies the design of innovation contests as a tool to outsource innovation when there is uncertainty about the feasibility of the project. In such a contest, participants race towards completing an innovation project and learn about its feasibility from their own efforts and their competitors' gradual progress. Information about the status of competition can alleviate some of the uncertainty inherent in the contest, but it can also adversely affect effort provision from the laggards. We explores the problem of designing the award structure of a contest and its information disclosure policy in a dynamic framework and provides a number of guidelines for maximizing the designer's expected payoff.
|Type of resource
|electronic; electronic resource; remote
|1 online resource.
|Stanford University, Department of Management Science and Engineering.
|Johari, Ramesh, 1976-
|Johari, Ramesh, 1976-
|Statement of responsibility
|Submitted to the Department of Management Science and Engineering.
|Thesis (Ph.D.)--Stanford University, 2016.
- © 2016 by Shayan Ehsani
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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