Incentive Contracts in Serial Stochastic Projects

• 成果类型: Article
• 署名作者: Chen, Tony; Klastorin, Ted; Wagner, Michael R.
• 署名单位: University of Washington; University of Washington Seattle
• 刊物名称: M&SOM-MANUFACTURING & SERVICE OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1523-4614
• DOI: 10.1287/msom.2015.0528
• 发表日期: 2015
• 页码: 290-301
• 关键词: incentives and contracting; production planning and scheduling; product development and design

摘要

In this paper we propose an incentive payment contract for stochastic projects defined by a series of stages or tasks that are outsourced to independent subcontractors. Projects defined by sequentially completed independent stages are common in new product development and other high-risk projects. Our goal is to maximize the client's expected discounted profit. Our proposed contract reflects the convex time-cost trade-off that is well known in the project scheduling literature. We show that this type of contract dominates a fixed price contract with respect to expected client's profit and schedule performance, regardless of payment timing considerations. Using a piecewise linear approximation, we show that our contract is a generalization of an incentive/disincentive contract that is frequently used in practice. We show how our contract can be used to find the optimal due date and penalties/bonuses in an incentive/disincentive contract. We compare this contract with several variations and discuss implications for both the client and subcontractors.