The role of work-in-process inventory in serial production lines
Operations Research
Optimal incentive-compatible priority pricing for the M/M/1 queue
Operations Research
Push and pull production systems: issues and comparisons
Operations Research
The delivery and control of quality in supplier-producer contracts
Management Science
Performance-Based Incentives in a Dynamic Principal-Agent Model
Manufacturing & Service Operations Management
Selling to the Newsvendor: An Analysis of Price-Only Contracts
Manufacturing & Service Operations Management
Competition and Outsourcing with Scale Economies
Management Science
Information, Contracting, and Quality Costs
Management Science
Gatekeepers and Referrals in Services
Management Science
Commissioned Paper: Telephone Call Centers: Tutorial, Review, and Research Prospects
Manufacturing & Service Operations Management
Self-Interested Routing in Queueing Networks
Management Science
Manufacturing & Service Operations Management
Outsourcing via Service Competition
Management Science
A Note on Probability Distributions with Increasing Generalized Failure Rates
Operations Research
Call Center Outsourcing: Coordinating Staffing Level and Service Quality
Management Science
Call Center Outsourcing Contracts Under Information Asymmetry
Management Science
Pricing and Dimensioning Competing Large-Scale Service Providers
Manufacturing & Service Operations Management
Quality--Speed Conundrum: Trade-offs in Customer-Intensive Services
Management Science
Outsourcing a Two-Level Service Process
Management Science
Information Hang-overs in Healthcare Service Systems
Manufacturing & Service Operations Management
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We study how rework routing together with wage and piece-rate compensation can strengthen incentives for quality. Traditionally, rework is assigned back to the agent who generates the defect (in a self-routing scheme) or to another agent dedicated to rework (in a dedicated routing scheme). In contrast, a novel cross-routing scheme allocates rework to a parallel agent performing both new jobs and rework. The agent who passes quality inspection or completes rework receives the piece rate paid per job. We compare the incentives of these rework-allocation schemes in a principal-agent model with embedded quality control and routing in a multiclass queueing network. We show that conventional self-routing of rework cannot induce first-best effort. Dedicated routing and cross-routing, however, strengthen incentives for quality by imposing an implicit punishment for quality failure. In addition, cross-routing leads to workload-allocation externalities and a prisoner's dilemma, thereby creating the greatest incentives for quality. Firm profitability depends on demand levels, revenues, and quality costs. When the number of agents increases, the incentive effect of cross-routing reduces monotonically and approaches that of dedicated routing.