The Impact of Contract Complexity, Supply Chain Configuration, and Out-of-Equilibrium Behavior on the Effectiveness of Information Sharing: A Second Laboratory Experiment

Guido Voigt
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Guido Voigt: Otto-von-Guericke University Magdeburg

Chapter Chapter 5 in Supply Chain Coordination in Case of Asymmetric Information, 2011, pp 109-145 from Springer

Abstract: Abstract The experiment presented in Chap. 4 shows a subtle way to measure the suppliers’ trust in supply chain interactions by analyzing the signal probability in a screening game. In contrast to the experiment presented in the following section, the supplier could choose out of 66 distinctive screening contracts which were generated with respect to the supplier’s assessment of the buyer’s private information (see payoff table in the sample instructions, Appendix 2 in Chap. 4). Yet, in the following experiment the number of options was substantially reduced, as previous research states that the number of options in a game can influence the decision maker’s behavior (see Ho and Weigelt 1996). Hence, the number of options was reduced to either offering a contract as if under full information or offering a screening contract. A closer look on the payoff tables used in the experiment introduced in Chap. 4 (see payoff table in the sample instructions, Appendix 3 in Chap. 4) and the underlying study (see Table 5.1) shows that the reduction of options makes the differences between the options more salient for the participants of the experiment. In other words, it is much easier for the subjects to analyze what would have happened if another contract would have been chosen, when there are only 4 options instead of 66. This approach was also chosen by Bolton and Katok (2008) who reduce the number of ordering options in a newsvendor setting. Bolton and Katok (2008) find that this reduction indeed influences the decision maker’s behavior, especially because there is the possibility of a focused feedback with respect to the limited number of options.

Date: 2011
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DOI: 10.1007/978-3-642-20132-5_5

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