Research Seminar on Supply Chain and Operations Management
time: 2017-07-04

Time: 9:00 am, July 10, 2017

Venue: Zhuanghui Hall, Building No. 12, Wushan Campus

Topic 1:Compete in Price or Service? - A Study of Personalized Pricing and Money Back Guarantees

Speaker: Prof. Bintong Chen

Associate Dean of Alfred Lerner College of Business & Economics, University of Delaware, Professor and Director of Financial Service Analysis Center and doctoral programs, Chair of the dean of the School of Business Administration of Southwestern University of Finance and Economics.


Retailers use both pricing and service strategies to respond to intensified competition. Here we develop a duopoly model to investigate the impact of the increasingly popular personalized pricing strategy (PPS) and the widely used Money Back Guarantee (MBG) customer returns policy. We consider two retailers who differ in customer satisfaction rates. Each retailer chooses a pricing strategy, PPS or uniform pricing, and a product return strategy, MBG or ‘no returns.’ We show that both PPS and MBG are dominant strategies, but their impact on retailers’ prices and profits are different; while PPS intensifies price competition and may lead to a prisoner’s dilemma in which both retailers may lose profit, MBG mitigates price competition and may result in a Pareto improvement in both retailers’ profits. Both PPS and MBG increase the size of the overall market, but not the total duopoly profit. The total customer surplus and social welfare may increase under either strategy. In addition, we obtain some interesting observations as to how our results may change if the product quality/customer satisfaction rate is endogenously chosen in the duopoly. Some of our findings are in contrast to related results reported in the literature.

Topic 2: Supply Management & Ethical Decision Making: A Behavioral Experiment

Speaker:Xenophon Koufteros,

Professor of Supply Chain Management at the Mays Business School, Texas A & M University where he also holds the Jenna & Calvin R. Guest Professorship in Business.


Supply managers and executives are under direct pressure to perform. Top management and external constituents expect supply management to reduce spend in order to bolster profitability. Thus, they may institute a compensation structure that motivates supply managers and executives to contain spend. To exacerbate the situation, supply managers and executives may get tempted to stray from ethical behavior due to the large amount of money they handle and due to lucrative but often unethical actions by sales personnel. This research uses a lab experiment approach to examine whether the reward structure and other salient factors (such as context, motivation, and personal characteristics) have an effect on ethical behavior.

Results suggest that 47% of the subjects acted ethically and did not share the lowest bid information with the supplier. About 19% of the subjects shared the correct lowest bid information while almost 34% of the subjects reported bid information which was below the lowest bid. The proportion of individuals that opted for a “middle of the road” yet unethical choice (i.e., they correctly reported the lowest bid price) is statistically significant at the 0.0001 level across a variety of environments and demonstrates that some individuals may act unethically but not so much, in order to maintain their self-concept (Mazar et al., 2008). Detailed analyses across three motivational environments suggest main effects as well as two-way and three-way interactions. The findings can potentially help construct compensation structures that motivate employees but curtail unethical behavior.