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Decentralized Mechanism Design for Supply Chain Organizations Using an Auction Market

Author

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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)

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.

Suggested Citation

  • Ming Fan & Jan Stallaert & Andrew B. Whinston, 2003. "Decentralized Mechanism Design for Supply Chain Organizations Using an Auction Market," Information Systems Research, INFORMS, vol. 14(1), pages 1-22, March.
    • Handle: RePEc:inm:orisre:v:14:y:2003:i:1:p:1-22
    DOI: 10.1287/isre.14.1.1.14763
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    Cited by:

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    2. Walther, Grit & Schmid, Eberhard & Spengler, Thomas S., 2008. "Negotiation-based coordination in product recovery networks," International Journal of Production Economics, Elsevier, vol. 111(2), pages 334-350, February.
    3. Leon Yang Chu, 2009. "Truthful Bundle/Multiunit Double Auctions," Management Science, INFORMS, vol. 55(7), pages 1184-1198, July.
    4. Wolfgang Ketter & John Collins & Maria Gini & Alok Gupta & Paul Schrater, 2012. "Real-Time Tactical and Strategic Sales Management for Intelligent Agents Guided by Economic Regimes," Information Systems Research, INFORMS, vol. 23(4), pages 1263-1283, December.
    5. Amit Basu & Sreekumar Bhaskaran & Rajiv Mukherjee, 2019. "An Analysis of Search and Authentication Strategies for Online Matching Platforms," Management Science, INFORMS, vol. 67(5), pages 2412-2431, May.
    6. Martin Bichler & Alexander Hammerl & Thayer Morrill & Stefan Waldherr, 2021. "How to Assign Scarce Resources Without Money: Designing Information Systems that are Efficient, Truthful, and (Pretty) Fair," Information Systems Research, INFORMS, vol. 32(2), pages 335-355, June.
    7. Zhiling Guo & Gary J. Koehler & Andrew B. Whinston, 2012. "A Computational Analysis of Bundle Trading Markets Design for Distributed Resource Allocation," Information Systems Research, INFORMS, vol. 23(3-part-1), pages 823-843, September.
    8. Jacqueline Corbett, 2013. "Using information systems to improve energy efficiency: Do smart meters make a difference?," Information Systems Frontiers, Springer, vol. 15(5), pages 747-760, November.
    9. Zhiling Guo & Gary J. Koehler & Andrew B. Whinston, 2007. "A Market-Based Optimization Algorithm for Distributed Systems," Management Science, INFORMS, vol. 53(8), pages 1345-1358, August.
    10. Ravi Bapna & Sanjukta Das & Robert Garfinkel & Jan Stallaert, 2008. "A Market Design for Grid Computing," INFORMS Journal on Computing, INFORMS, vol. 20(1), pages 100-111, February.
    11. Huang, George Q. & Qu, T., 2008. "Extending analytical target cascading for optimal configuration of supply chains with alternative autonomous suppliers," International Journal of Production Economics, Elsevier, vol. 115(1), pages 39-54, September.
    12. Thomas D. Jeitschko & Pallavi Pal, 2021. "Curbing Price Fluctuations in Cap-and-Trade Auctions," CESifo Working Paper Series 9266, CESifo.
    13. G. Rius-Sorolla & J. Maheut & S. Estellés-Miguel & J. P. Garcia-Sabater, 2020. "Coordination mechanisms with mathematical programming models for decentralized decision-making: a literature review," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 28(1), pages 61-104, March.
    14. Alev Ozer Torgaloz & Mehmet Fatih Acar & Cemil Kuzey, 2023. "The effects of organizational learning culture and decentralization upon supply chain collaboration: analysis of covid-19 period," Operations Management Research, Springer, vol. 16(1), pages 511-530, March.
    15. Tobias Scheffel & Alexander Pikovsky & Martin Bichler & Kemal Guler, 2011. "An Experimental Comparison of Linear and Nonlinear Price Combinatorial Auctions," Information Systems Research, INFORMS, vol. 22(2), pages 346-368, June.
    16. Jayashankar M. Swaminathan & Sridhar R. Tayur, 2003. "Models for Supply Chains in E-Business," Management Science, INFORMS, vol. 49(10), pages 1387-1406, October.
    17. Emerson, Denise & Zhou, Wei & Piramuthu, Selwyn, 2009. "Goodwill, inventory penalty, and adaptive supply chain management," European Journal of Operational Research, Elsevier, vol. 199(1), pages 130-138, November.
    18. Ketter, W. & Collins, J. & Gini, M. & Gupta, A. & Schrater, P., 2011. "Real-time Tactical and Strategic Sales Management for Intelligent Agents Guided By Economic Regimes," ERIM Report Series Research in Management ERS-2011-012-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

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