Universität zu Köln

Scheele, Lisa M., Thonemann, Ulrich ORCID: 0000-0002-3507-9498 and Slikker, Marco ORCID: 0000-0003-4705-1588 (2018). Designing Incentive Systems for Truthful Forecast Information Sharing Within a Firm. Manage. Sci., 64 (8). S. 3690 - 3714. CATONSVILLE: INFORMS. ISSN 1526-5501

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Abstract

We consider a firm where the sales division (SALES) is responsible for demand forecasting and the operations division (OPERATIONS) is responsible for ordering. SALES has better information about the demand than OPERATIONS and sends a nonbinding demand forecast to OPERATIONS. To incentivize truthful information sharing, we include a forecast error penalty in the incentive system of SALES. Besides monetary payoffs, we also add behavioral factors to the utility function of SALES. We model the setting as a signaling game and derive the Pareto-dominant separating equilibria of the game. In laboratory experiments, we observe human behavior that is in line with the predictions of the behavioral model but deviates substantially from expected-payoff-maximizing behavior. We use the behavioral model to design incentive systems for truthful information sharing and validate the approach in an experiment with out-of-sample treatments and out-of-sample subjects. We conduct additional experiments to provide further robustness to the results.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Scheele, Lisa M. UNSPECIFIED UNSPECIFIED UNSPECIFIED Thonemann, Ulrich UNSPECIFIED orcid.org/0000-0002-3507-9498 UNSPECIFIED Slikker, Marco UNSPECIFIED orcid.org/0000-0003-4705-1588 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-177370
DOI:	10.1287/mnsc.2017.2805
Journal or Publication Title:	Manage. Sci.
Volume:	64
Number:	8
Page Range:	S. 3690 - 3714
Date:	2018
Publisher:	INFORMS
Place of Publication:	CATONSVILLE
ISSN:	1526-5501
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Center of Excellence C-SEB
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language SUPPLY CHAIN COORDINATION; DEMAND FORECASTS; SOCIAL PREFERENCES; PROSPECT-THEORY; TRUST; PERFORMANCE; CONTRACTS; PROVISION; AMBIGUITY; FAIRNESS Multiple languages Management; Operations Research & Management Science Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/17737