Trends and Research in the Decision Sciences: Best Papers from the 2014 Annual Conference

20. Do Competing Suppliers Maximize Profits as Theory Suggests? An Empirical Evaluation

—Ehsan Elahi, University of Massachusetts Boston

—Roger Blake, University of Massachusetts Boston

Abstract

This research compares results from laboratory experiments with predictions from theory for decisions made by competing suppliers. We consider a supply chain in which a single buyer outsources the manufacture of a commodity product to suppliers not on the basis of price, but rather on service. Three different criteria on which suppliers compete are evaluated: (1) a guaranteed specific inventory fill-rate, (2) a guaranteed level of base-stock, and (3) a parameter optimizing the supply chain in the buyer’s favor. Our results show that in most cases, suppliers’ ...