IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v282y2020i2p559-568.html
   My bibliography  Save this article

Combating product label misconduct: The role of traceability and market inspection

Author

Listed:
  • Yao, Shiqing
  • Zhu, Kaijie

Abstract

Traceability has become an important feature in supply chain management. It can be adopted to identify the sources of many quality problems. In this paper, we develop a game theoretical model to study the role of traceability in combating product label misconduct. Specifically, we consider an industrial organization that assigns product labels to its members to certify their products in an output market. However, a member of the organization may choose to sell its product label to an unregulated party that makes unqualified units. The organization can choose between a traceable product label system and an untraceable one. The former has the advantage of identifying the responsible member when the inspection detects an unqualified unit. We derive the optimal inspection polices of the two product label systems and demonstrate that the organization may incur a higher cost by adopting the traceable rather than untraceable label system. This non-intuitive result indicates that without a proper management mechanism in place, the adoption of a traceable product label system may backfire. We extend our base model and show that our main insights are robust in various settings.

Suggested Citation

  • Yao, Shiqing & Zhu, Kaijie, 2020. "Combating product label misconduct: The role of traceability and market inspection," European Journal of Operational Research, Elsevier, vol. 282(2), pages 559-568.
    • Handle: RePEc:eee:ejores:v:282:y:2020:i:2:p:559-568
    DOI: 10.1016/j.ejor.2019.09.031
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S037722171930788X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2019.09.031?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yi Qian, 2014. "Brand Management and Strategies Against Counterfeits," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(2), pages 317-343, June.
    2. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    3. Antoine Faure-Grimaud & Jean-Jacques Laffont & David Martimort, 2003. "Collusion, Delegation and Supervision with Soft Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 253-279.
    4. Saak, Alexander E., 2016. "Traceability and reputation in supply chains," International Journal of Production Economics, Elsevier, vol. 177(C), pages 149-162.
    5. Hubert Pun & Gregory D. DeYong, 2017. "Competing with Copycats When Customers Are Strategic," Manufacturing & Service Operations Management, INFORMS, vol. 19(3), pages 403-418, July.
    6. W. Kip Viscusi, 1978. "A Note on "Lemons" Markets with Quality Certification," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 277-279, Spring.
    7. Banerjee, Dyuti S., 2003. "Software piracy: a strategic analysis and policy instruments," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 97-127, January.
    8. Jie Zhang & L. Hong & Rachel Zhang, 2012. "Fighting strategies in a market with counterfeits," Annals of Operations Research, Springer, vol. 192(1), pages 49-66, January.
    9. Yang, Ya & Chi, Huihui & Tang, Ou & Zhou, Wei & Fan, Tijun, 2019. "Cross perishable effect on optimal inventory preservation control," European Journal of Operational Research, Elsevier, vol. 276(3), pages 998-1012.
    10. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
    11. Aiello, Giuseppe & Enea, Mario & Muriana, Cinzia, 2015. "The expected value of the traceability information," European Journal of Operational Research, Elsevier, vol. 244(1), pages 176-186.
    12. Jean-Jacques Laffont & David Martimort, 2000. "Mechanism Design with Collusion and Correlation," Econometrica, Econometric Society, vol. 68(2), pages 309-342, March.
    13. Golan, Elise H. & Krissoff, Barry & Kuchler, Fred & Calvin, Linda & Nelson, Kenneth E. & Price, Gregory K., 2004. "Traceability In The U.S. Food Supply: Economic Theory And Industry Studies," Agricultural Economic Reports 33939, United States Department of Agriculture, Economic Research Service.
    14. Lucia Quesada, 2005. "Collusion as an Informed Principal Problem," Game Theory and Information 0504002, University Library of Munich, Germany.
    15. Soo-Haeng Cho & Xin Fang & Sridhar Tayur, 2015. "Combating Strategic Counterfeiters in Licit and Illicit Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 17(3), pages 273-289, July.
    16. Gunasekaran, A. & Ngai, E. W. T., 2004. "Information systems in supply chain integration and management," European Journal of Operational Research, Elsevier, vol. 159(2), pages 269-295, December.
    17. Piramuthu, Selwyn & Farahani, Poorya & Grunow, Martin, 2013. "RFID-generated traceability for contaminated product recall in perishable food supply networks," European Journal of Operational Research, Elsevier, vol. 225(2), pages 253-262.
    18. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    19. Starbird, S. Andrew & Amanor-Boadu, Vincent, 2006. "Do Inspection and Traceability Provide Incentives for Food Safety?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(1), pages 1-13, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lingxiu Dong & Puping (Phil) Jiang & Fasheng Xu, 2023. "Impact of Traceability Technology Adoption in Food Supply Chain Networks," Management Science, INFORMS, vol. 69(3), pages 1518-1535, March.
    2. Niu, Baozhuang & Chen, Lingyun & Wang, Jingmai, 2022. "Ad valorem tariff vs. specific tariff: Quality-differentiated e-tailers’ profitability and social welfare in cross-border e-commerce," Omega, Elsevier, vol. 108(C).
    3. Dai, Bin & Nu, Yu & Xie, Xia & Li, Jianbin, 2021. "Interactions of traceability and reliability optimization in a competitive supply chain with product recall," European Journal of Operational Research, Elsevier, vol. 290(1), pages 116-131.
    4. Hu Linyuan & Ding Jinzhi & Yang Xiying, 2021. "Blockchain or Not? Optimal Decisions for Food Retailers Considering Consumer Expertise," Journal of Systems Science and Information, De Gruyter, vol. 9(3), pages 321-334, June.
    5. Junhai Ma & Jiecai Chen & Yuxin Liu, 2022. "Research on optimization of food supply chain considering product traceability recall and safety investment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3953-3972, December.
    6. Montecchi, Matteo & Plangger, Kirk & West, Douglas C., 2021. "Supply chain transparency: A bibliometric review and research agenda," International Journal of Production Economics, Elsevier, vol. 238(C).
    7. Zhou, Yu & Gao, Xiang & Luo, Suyuan & Xiong, Yu & Ye, Niangyue, 2022. "Anti-Counterfeiting in a retail Platform: A Game-Theoretic approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).
    8. Li, Zhiwen & Xu, Xianhao & Bai, Qingguo & Guan, Xu & Zeng, Kuan, 2021. "The interplay between blockchain adoption and channel selection in combating counterfeits," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    9. Liu, Hengyu, 2022. "Combating unethical producer behavior: The value of traceability in produce supply chains," International Journal of Production Economics, Elsevier, vol. 244(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bilgehan Karabay, 2017. "Optimal Regulation of Multinationals under Collusion," The World Economy, Wiley Blackwell, vol. 40(8), pages 1687-1706, August.
    2. von Negenborn, Colin & Pollrich, Martin, 2020. "Sweet lemons: Mitigating collusion in organizations," Journal of Economic Theory, Elsevier, vol. 189(C).
    3. He, Chao & Tan, Chunqiao & Ip, W.H. & Wu, C.H., 2023. "Combating counterfeits with the Blockchain-technology-supported platform under government enforcement," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).
    4. Mookherjee, Dilip & Motta, Alberto & Tsumagari, Masatoshi, 2020. "Consulting collusive experts," Games and Economic Behavior, Elsevier, vol. 122(C), pages 290-317.
    5. Celik, Gorkem, 2009. "Mechanism design with collusive supervision," Journal of Economic Theory, Elsevier, vol. 144(1), pages 69-95, January.
    6. Che,Y.-K. & Kim,J., 2004. "Collusion-proof implementation of optimal mechanisms," Working papers 4, Wisconsin Madison - Social Systems.
    7. Meng, Dawen & Tian, Guoqiang, 2008. "Nonlinear Pricing with Arbitrage: On the Role of Correlation," MPRA Paper 41207, University Library of Munich, Germany.
    8. Michela Cella, 2011. "Monitoring subcontracting in a suppliers' hierarchy," Oxford Economic Papers, Oxford University Press, vol. 63(3), pages 523-548, July.
    9. Zhou, Yu & Gao, Xiang & Luo, Suyuan & Xiong, Yu & Ye, Niangyue, 2022. "Anti-Counterfeiting in a retail Platform: A Game-Theoretic approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).
    10. Bian, Junsong & Zhang, Guoqing & Zhou, Guanghui, 2023. "The strategic impact of vertical integration on non-deceptive counterfeiting," International Journal of Production Economics, Elsevier, vol. 260(C).
    11. Sylvain Chassang & Gerard Padró i Miquel, 2014. "Corruption, Intimidation, and Whistle-blowing: a Theory of Inference from Unverifiable Reports," NBER Working Papers 20315, National Bureau of Economic Research, Inc.
    12. Bin Shen & Ciwei Dong & Stefan Minner, 2022. "Combating Copycats in the Supply Chain with Permissioned Blockchain Technology," Production and Operations Management, Production and Operations Management Society, vol. 31(1), pages 138-154, January.
    13. Hu, Shu & Fu, Ke & Wu, Tong, 2021. "The role of consumer behavior and power structures in coping with shoddy goods," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    14. Hiriart, Yolande & Martimort, David & Pouyet, Jerome, 2010. "The public management of risk: Separating ex ante and ex post monitors," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1008-1019, December.
    15. Fahad Khalil & Jacques Lawarrée & Sungho Yun, 2010. "Bribery versus extortion: allowing the lesser of two evils," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 179-198, March.
    16. Asseyer, Andreas, 2016. "Optimal Information Disclosure and Collusion," VfS Annual Conference 2016 (Augsburg): Demographic Change 145779, Verein für Socialpolitik / German Economic Association.
    17. Fahad Khalil & Jacques Lawarrée & Troy J. Scott, 2015. "Private monitoring, collusion, and the timing of information," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 872-890, October.
    18. Sergei Severinov, 2008. "The value of information and optimal organization," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 238-265, March.
    19. Sun, Jiong & Zhang, Xing & Zhu, Qingyuan, 2020. "Counterfeiters in Online Marketplaces: Stealing Your Sales or Sharing Your Costs," Journal of Retailing, Elsevier, vol. 96(2), pages 189-202.
    20. Yeon-Koo Che, 2002. "The Economics of Collective Negotiation in Pretrial Bargaining," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 549-576, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:282:y:2020:i:2:p:559-568. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.