Ruth Beer is an Assistant Professor in the Department of Operations & Decision Technologies. Her areas of expertise include behavioral operations management, collaboration in supply chains and experimental economics.
Industry Expertise (2)
Areas of Expertise (3)
Behavioral Operations Management
Collaboration in Supply Chains
Universidad Torcuato Di Tella: M.B.A. 2007
University of Michigan: Ph.D., Operations and Management Science 2016
Universidad de Buenos Aires: B.S., Industrial Engineering 2004
Many projects (such as innovation and new product development) often involve tight collaboration among several firms. The success of such initiatives depends on all firms committing resources and generating high quality outputs. We consider a setting with two firms engaging in a collaborative project and study two mechanisms by which one of the firms can increase the output observability in order to coordinate in both firms delivering high quality: monitoring the other firm's progress or disclosing her own progress to the other firm. We first develop normative predictions using game-theoretic models and find that when the project value is intermediate, a firm should choose monitoring; when the project value is high, she should be indifferent between monitoring and disclosure. To test the normative prediction, we conducted a laboratory experiment. We find that firms mostly choose monitoring regardless of the project value. However, choosing disclosure does not necessarily lead to a lower profit for a firm. In fact, when the project value is high, choosing disclosure has a higher profit potential than monitoring. This is due to a framing effect: the partner firm – who observes the progress of the firm who chooses to disclose – is willing to choose a higher quality. Overall, disclosure leads to higher profits for the partner firm, and is preferred by firms who are intrinsically surplus maximizers. This implies profitable opportunities for firms if they have a chance to choose the more open firms (who are prone to disclose their progress) as their project partners, ceteris paribus.
Many firms recognize exceptional supplier performance by giving out a "Supplier of the Year" or "Outstanding Supplier" award. These awards are usually symbolic since they have no immediate monetary value for a supplier and no direct cost to a buyer. Giving these awards can be beneficial for a buyer: if suppliers care about being rewarded, symbolic awards can incentivize a supplier to exert higher effort. On the other hand, in a market with multiple buyers and suppliers, an award may have another effect, which we denote "competition effect". When good suppliers are scarce, a public award can intensify the competition to do business with a good supplier. We develop a theoretical model that captures a supplier's value for the award in a setting with two buyers and two suppliers. We show that the average provision of quality is higher when awards are available whether these are private (only observable to the recipient) or public (observable to everyone). In addition, public awards result in buyers paying a higher price to get a good supplier. We then test these results with a laboratory experiment. Our experimental results show that private symbolic awards have incentive effects and lead to higher provision of quality and higher buyer's profits. When the awards are public this profit premium disappears. This happens for two reasons, first because buyers have to pay higher prices to get the good suppliers, and second because making the award public crowds out the intrinsic value of the award for suppliers.
Motivated by recent initiatives to increase transparency in procurement, we study the effects of disclosing information about previous purchases in a setting where an organization delegates its purchasing decisions to its employees. When employees can use their own discretion —which may be influenced by personal preferences— to select a supplier, the incentives of the employees and the organization may be misaligned. Disclosing information about previous purchasing decisions made by other employees can reduce or exacerbate his misalignment, as peer effects may come into play. To understand the effects of transparency, we introduce a theoretical model that compares employees’ actions in a setting where they cannot observe each other’s choices, to a setting where they can observe the decision previously made by a peer before making their own. Two behavioral considerations are central to our model: that employees are heterogeneous in their reciprocity towards their employer, and that they experience peer effects in the form of income inequality aversion towards their peer. As a result, our model predicts the existence of negative spillovers as a reciprocal employee is more likely to choose the expensive supplier (which gives him a personal reward) when he observes that a peer did so. A laboratory experiment confirms the existence of negative spillovers and the main behavioral mechanisms described in our model. A surprising result not predicted by our theory, is that employees whose decisions are observed by their peers are less likely to choose the expensive supplier than the employees in the no transparency case. We show that observed employees’ preferences for compliance with the social norm of “appropriate purchasing behavior” explain our data well.
The relationship between a buyer and its suppliers often relies on factors beyond the terms of a contractual agreement. Buyers can therefore benefit from identifying trustworthy suppliers. We argue that precontractual actions by a supplier, for example making costly buyer-specific investments without a long-term contract, can signal a supplier’s trustworthiness. We develop a theoretical model to reflect supplier trustworthiness, and determine when a buyer can benefit from identifying trustworthy suppliers. We show that costly relationship-specific investments can serve as a signal of trustworthiness, and that supply chain profits increase when trustworthy suppliers are able to identify themselves in this fashion. We demonstrate the importance of the signaling mechanism using laboratory experiments. The experimental results show that relationship-specific investments lead to more collaborative transactions, with buyers offering higher prices and suppliers returning higher-quality products. This results in increased profits for both buyers and suppliers. Additionally, we design a treatment which shuts down the signaling mechanism and show that the benefits of the buyer-specific investment are no longer present in this case. Finally, we show that the benefits of buyer-specific investments for both suppliers and buyers are strengthened when firms interact repeatedly.
While innovation sharing between a buyer and a supplier can increase the efficiency of a supply chain, many suppliers are reluctant to do so. Sharing innovations leaves the supplier in a vulnerable position if the buyer exploits the information (e.g. by re-sharing the supplier's innovation with competing suppliers). In this paper, we examine conditions under which a collaborative relationship can arise in this situation, with a supplier voluntarily sharing an innovation and a buyer repaying that trust by sharing the surplus increase rather than seeking competing bids from other suppliers. First we show, both theoretically and experimentally, that decisions to collaborate are affected by the length of the relationship between the firms - longer relationships lead to higher collaboration and higher total profits. We additionally show that collaboration depends not just on the firm-level relationship length, but also on the long- or short-run focus of the employees within the firms that make decisions. We model the buyer as a dual decision maker, with long-run and/or short-run focused employees ("engineers" and "procurement managers") determining the buyer's actions. We find that collaborative relationships occur more often when the engineer has more control. However, while the supplier's decision to share innovation depends primarily on the firm-level relationship length, the buyer's decision to seek competition depends more on the relationship focus of the controlling employees. Finally, while suppliers and engineers should theoretically ignore the actions of the previous procurement managers, both suppliers' and engineers' actions are correlated with the previous procurement managers' decision.