Dr. Xiaole Wu, Sourcing Competition Under Cost Uncertainty and Information Asymmetry, 16:00-17:00, April 4 (Saturday), 2020, Online Lotus Pond Rain Classroom: W141WB, ZOOM ID: 619 916 332, Tencent ID:493 143 477 2020.04.03

[Time] 16:00-17:00, April 4 (Saturday), 2020
[Location] Online
Lotus Pond Rain Classroom: W141WB
ZOOM ID:  619 916 332
Tencent ID:493 143 477
[Speaker]  Dr. Xiaole Wu

[Host] Dr. Fang He
[Title] Sourcing Competition Under Cost Uncertainty and Information Asymmetry

Note: We will register the seminar for the attendees by the record in Lotus Pond Rain Classroom.

[Abstract] Driven by increasing costs in the traditionally-regarded low-cost manufacturing bases (e.g., China), many firms have started to outsource their production to the regions of even lower costs (e.g., Southeast Asia). However, a new environment may involve higher cost uncertainty and severer information asymmetry. Motivated by these observations, we consider a sourcing game where competing firms choose between a supplier with transparent certain cost (type-C supplier) and a supplier with potentially lower but less transparent, uncertain cost (type-U supplier). We characterize the equilibrium of the sourcing game and study how different parameters affect the firms' sourcing strategy and profit performance. First, we find that due to information asymmetry, a large market size can make firms prefer the C-supplier to the U-supplier even if the latter has a lower average cost. Second, reducing the cost uncertainty or improving the signal accuracy of the U-supplier does not necessarily make it more attractive to sourcing firms, which cautions the suppliers when making efforts to mitigate cost uncertainty or improve cost estimation. Third, higher competition intensity makes the diversified sourcing strategy more likely to be adopted under certain conditions. Interestingly, increasing the cost of the C-supplier (e.g., a cost hike in China) may make both sourcing firms better off because it can lead to a new sourcing equilibrium. Finally, this paper shows that the direction of quantity distortion under the optimal competitive mechanism differs from that under the traditional monopolistic setting.

[Bio] Xiaole Wu is a Professor and Ph.D. Supervisor in the School of Management, Fudan University. She holds a bachelor degree from the Department of Industrial Engineering, Tsinghua University and a Ph.D. degree from Olin Business School, Washington University in St. Louis. Her research interests include supply chain management, risk management, and sustainable operations. Her research has appeared in Management Science, MSOM, POM, and so on. She is a principal investigator of the National Natural Science Fund for Excellent Young Scholar, and the Shanghai Shuguang Talent Project. She won China Youth Prize of Distinguished Contribution in Management, the Best Paper Award of the fourth CSAMSE conference (first prize), Shanghai Award for Outstanding Achievements in Philosophy and Social Science (second prize), and 2016 MSOM Meritorious Service Award. Currently, she serves as a Senior Editor of the UTD journal Production and Operations Management, and an Associate Editor of the INFORMS journal Service Science, and Modern Supply Chain Research and Applications.

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