Quality Improvement Incentives and Product Recall Cost Sharing Contracts

• Published in: Management science Vol. 55; no. 7; pp. 1122 - 1138
• Main Authors: Chao, Gary H, Iravani, Seyed M. R, Savaskan, R. Canan
• Format: Journal Article
• Language: English
• Published: Hanover, MD INFORMS 01.07.2009; Institute for Operations Research and the Management Sciences
• Series: Management Science
• Subjects: Applied sciences; Asymmetric information; Asymmetry; Business studies; Capital costs; Consumer behavior; contracts; Cost allocation; Cost analysis; Cost efficiency; Cost incentives; Cost sharing; Exact sciences and technology; Firm modelling; Game theory; Incentives; Industrial design; information asymmetry; Logistics; Management; Manufacturers; Manufacturing processes; Operational research and scientific management; Operational research. Management science; Product design; Product management; Product quality; Product recalls; Product reliability; Production costs; quality control; Quality improvement; Quality standards; reliability; Reliability theory. Replacement problems; Studies; Suppliers; supply chain coordination; Supply chain management; Supply chains; Total quality; United States; Capability index; Production quality; Coordination; supply chain coordination; Processing quality; Cost benefit analysis; Failure rate; contracts; Game theory; product design; Quality assurance; Business model; Social psychology; Asymmetry; Sharing; information asymmetry; Quality control; Profit; Recall; Causality; Reliability; Contract; By product; Logistics

As companies outsource more product design and manufacturing activities to other members of the supply chain, improving end-product quality has become an endeavor extending beyond the boundaries of the firms' in-house process capabilities. In this paper, we discuss two contractual agreements by...