Essays on information, incentives and operational strategies

The thesis consists of three projects on information asymmetry and strategic interactions within operations management.;The first project explores the potential of revenue sharing contracts to facilitate information sharing in a supply chain and mitigate the negative effects of information leakage. We consider a supplier who offers a revenue sharing contract to two competing retailers, one of whom has private information about uncertain market potential and orders first. This order information may be leaked to the uninformed retailer by the supplier to realize higher profits. We show that the incentives of the supplier and retailers are better aligned under a revenue-sharing contract unlike in a wholesale price contract, reducing the supplier's incentive to leak. This is true for a wide range of wholesale prices and revenue share percentages and is more likely when the revenue share percentage is higher and when variation in demand is greater. Preventing information leakage may result in higher profits not only for the informed retailer and supplier, but surprisingly even the uninformed retailer. The results are robust when the model is generalized along various dimensions.;Service outsourcing has become more prevalent online, but significant information asymmetry arises between a service provider and a customer. Both sides have information that benefits the other one but one may distort that information to take advantage of the other. The second project considers three contracts: fixed fee, time based payment (hourly rate times service time) and two-part tariff contract and investigate how a service provider's optimal effort level and profit are impacted by the nature of the contracts. It identifies conditions under which (i) the firm will provide the same or different quality levels to different customer types and (ii) the pricing contracts produce the same or different outcomes. It also explores the impact of the SP's hidden effort: how it affects the SP's ability to discriminate among buyers and whether it reduces or increases his profits. It turns out hidden effort does not change the SP's profits under fixed fee and two part tariff. Hidden effort only has an impact under time based payment. Hidden effort reduces the profit of a high cost service provider because he cannot charge a high price rate. On the other hand, hidden effort improves the profit of a low cost service provider because it gains the flexibility to strategically misreport its actual effort. In addition, it finds that time-based payment can be as effective as two part tariff in certain parameter ranges.;A service firm always faces a trade-off between exploring a larger market size and reducing the congestion in the business process. Especially nowadays a firm could easily use Social advertising tools such as Groupon to introduce a lot of new customers to their business in a short time. But When you introduce new customers by a Groupon promotion, you may attract deal hunters who bring congestion to your business. So not only do you lose money on these deal hunters who may not return but you also increase congestion that may drive away your regular customers. The third project formally characterize these effects that promotion strategies have on a firm's profit and come up with recommendations for effective promotion strategies.