Setting the right incentives for global planning and operations

Henk Norde, Ulas Ozen, Marco Slikker

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We study incentive issues seen in a firm performing global planning and manufacturing, and local demand management. The stochastic demands in local markets are best observed by the regional business units, and the firm relies on the business units’ forecasts for planning of global manufacturing operations. We propose a class of performance evaluation schemes that induce the business units to reveal their private demand information truthfully by turning the business units’ demand revelation game into a potential game with truth telling being a potential maximizer, an appealing refinement of Nash equilibrium. Moreover, these cooperative performance evaluation schemes satisfy several essential fairness notions. After analyzing the characteristics of several performance evaluation schemes in this class, we extend our analysis to include the impact of effort on demand.
Original languageEnglish
Pages (from-to)441-455
JournalEuropean Journal of Operational Research
Volume253
Issue number2
DOIs
Publication statusPublished - Sep 2016

Fingerprint

Incentives
Planning
Performance Evaluation
Industry
Unit
Manufacturing
Potential Games
Stochastic Demand
Fairness
Nash Equilibrium
Forecast
Business
Refinement
Game
Demand
Performance evaluation

Keywords

  • production systems
  • information asymmetry
  • incentive management
  • game theory

Cite this

Norde, Henk ; Ozen, Ulas ; Slikker, Marco. / Setting the right incentives for global planning and operations. In: European Journal of Operational Research. 2016 ; Vol. 253, No. 2. pp. 441-455.
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Setting the right incentives for global planning and operations. / Norde, Henk; Ozen, Ulas; Slikker, Marco.

In: European Journal of Operational Research, Vol. 253, No. 2, 09.2016, p. 441-455.

Research output: Contribution to journalArticleScientificpeer-review

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