Decentralized Mechanism Design for Supply Chain Organizations Using an Auction Market

Ming Fan (), Jan Stallaert () and Andrew B. Whinston ()
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Ming Fan: Management Science Department, University of Washington Business School, Seattle, Washington 98195
Jan Stallaert: Department of Operations and Information Management, School of Business, University of Connecticut, Storrs, Connecticut 06269
Andrew B. Whinston: Center for Research in Electronic Commerce, Department of Management Science and Information Systems, University of Texas at Austin, Austin, Texas 78712

Information Systems Research, 2003, vol. 14, issue 1, 1-22

Abstract: Traditional development of large-scale information systems is based on centralized information processing and decision making. With increasing competition, shorter product life-cycle, and growing uncertainties in the marketplace, centralized systems are inadequate in processing information that grows at an explosive rate and are unable to make quick responses to real-world situations. Introducing a decentralized information system in an organization is a challenging task. It is often intertwined with other organizational processes. The goal of this research is to outline a new approach in developing a supply chain information system with a decentralized decision making process. Particularly, we study the incentive structure in the decentralized organization and design a market-based coordination system that is incentive aligned, i.e., it gives the participants the incentives to act in a manner that is beneficial to the overall system. We also prove that the system monotonically improves the overall organizational performance and is goal congruent.

Keywords: decentralized information system; coordination mechanism; incentive; auction; complementarity; supply chain (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (20)

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