Outsourcing via Service Competition
Management Science
Competitive Options, Supply Contracting, and Electronic Markets
Management Science
Incentives for Quality Through Endogenous Routing
Manufacturing & Service Operations Management
Second Sourcing vs. Sole Sourcing with Capacity Investment and Asymmetric Information
Manufacturing & Service Operations Management
Manufacturing & Service Operations Management
Project Management Contracts with Delayed Payments
Manufacturing & Service Operations Management
Promised Delivery Time and Capacity Games in Time-Based Competition
Management Science
Centralized vs. Decentralized Ambulance Diversion: A Network Perspective
Management Science
Capacity Allocation over a Long Horizon: The Return on Turn-and-Earn
Manufacturing & Service Operations Management
Consolidating or non-consolidating queues: A game theoretic queueing model with holding costs
Operations Research Letters
Large-Scale Service Marketplaces: The Role of the Moderating Firm
Management Science
Dynamic Capacity Allocation to Customers Who Remember Past Service
Management Science
Establishing Nash equilibrium of the manufacturer---supplier game in supply chain management
Journal of Global Optimization
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Any buyer that depends on suppliers for the delivery of a service or the production of a make-to-order component should pay close attention to the suppliers' service or delivery lead times. This paper studies a queueing model in which two strategic servers choose their capacities/processing rates and faster service is costly. The buyer allocates demand to the servers based on their performance; the faster a server works, the more demand the server is allocated. The buyer's objective is to minimize the average lead time received from the servers. There are two important attributes to consider in the design of an allocation policy: the degree to which the allocation policy effectively utilizes the servers' capacities and the strength of the incentives the allocation policy provides for the servers to work quickly. Previous research suggests that there exists a trade-off between efficiency and incentives, i.e., in the choice between two allocation policies a buyer may prefer the less efficient one because it provides stronger incentives. We find considerable variation in the performance of allocation policies: Some intuitively reasonable policies generate essentially no competition among servers to work quickly, whereas others generate too much competition, thereby causing some servers to refuse to work with the buyer. Nevertheless, the trade-off between efficiency and incentives need not exist: It is possible to design an allocation policy that is efficient and also induces the servers to work quickly. We conclude that performance-based allocation can be an effective procurement strategy for a buyer as long as the buyer explicitly accounts for the servers' strategic behavior.