2023-09-28 14:46:10 +00:00
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abstract: 'The reservation of goods to be produced in the micro, small, and medium
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enterprises (MSME) sector, in the early years after India''s
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independence, addressed the dual needs of development of the industrial
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sector and production of goods. However, these industrial policies
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created an incentive for firms to remain small so that they can continue
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to avail of the benefits provided by the Government. On the positive
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side, the MSMEs typically employ more labor intensive production
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processes and consequently contribute significantly to the provision of
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employment opportunities, generation of income, and poverty reduction.
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But, on the negative side, the policies have also partly facilitated the
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creation of a divide in terms of productivity between the MSMEs and
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large sized firms. In particular the policy raises important questions
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for a firm auctioning supply contracts among suppliers with a
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significant cost differential. In this paper we propose an idea to
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allocate supply contracts wherein a manufacturing firm partitions the
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stochastic demand into mutually exclusive portions and awards each
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portion to a different supplier. We characterize such an optimal
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procurement mechanism when there are two types of suppliers and an
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arbitrary number of demand portions. We show that the optimal
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procurement may require the manufacturer to intentionally withhold some
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demand portion, and this arises when one type of supplier is
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considerably inefficient in serving a demand portion. We extend our
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analysis to the cases with multiple types with two suppliers and two
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types with multiple suppliers. The optimal partition is composed of at
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most six contiguous demand portions, and it may include a detrimental
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demand portion that only generates a negative expected payoff to both
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supplier types. Our demand partitioning mechanism leads to a strictly
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higher manufacturer''s expected payoff than the conventional
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winner-take-all case unless one supplier type completely dominates the
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other. We present numerical experiments that indicate when such a
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mechanism holds the greatest advantage for the buyer.'
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affiliation: 'Sohoni, MG (Corresponding Author), Indian Sch Business, Hyderabad, India.
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Chen, Ying-Ju, Hong Kong Univ Sci \& Technol, Sch Business \& Management, Clear
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Water Bay, Hong Kong, Peoples R China.
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Chen, Ying-Ju, Hong Kong Univ Sci \& Technol, Sch Engn, Clear Water Bay, Hong Kong,
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Peoples R China.
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Seshadri, Sridhar, Univ Illinois, Gies Coll Business, Urbana, IL 61801 USA.
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Sohoni, Milind G., Indian Sch Business, Hyderabad, India.'
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author: Chen, Ying-Ju and Seshadri, Sridhar and Sohoni, Milind G.
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author-email: milind\_sohoni@isb.edu
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author_list:
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- family: Chen
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given: Ying-Ju
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- family: Seshadri
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given: Sridhar
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- family: Sohoni
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given: Milind G.
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da: '2023-09-28'
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doi: 10.1002/nav.21953
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earlyaccessdate: NOV 2020
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eissn: 1520-6750
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files: []
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issn: 0894-069X
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journal: NAVAL RESEARCH LOGISTICS
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keywords: demand partitioning; industrial policy; mechanism design; procurement
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keywords-plus: INFORMATION; AUCTIONS; POLICIES
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language: English
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month: DEC
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number: 8, SI
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number-of-cited-references: '21'
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orcid-numbers: 'Sohoni, Milind/0000-0002-5236-2375
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Sohoni, Milind/0000-0003-0510-7109'
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pages: 1037-1053
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papis_id: a92970e60cbe833923d539fda80f999a
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ref: Chen2021demandpartitioning
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researcherid-numbers: 'Sohoni, Milind/E-4894-2015
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chen, ying/HHS-8254-2022
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Sohoni, Milind/E-4894-2015'
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times-cited: '2'
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title: A demand partitioning framework to reserve production for small enterprises
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2023-10-01 08:15:07 +00:00
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type: article
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2023-09-28 14:46:10 +00:00
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unique-id: WOS:000586041700001
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usage-count-last-180-days: '3'
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usage-count-since-2013: '29'
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volume: '68'
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web-of-science-categories: Operations Research \& Management Science
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year: '2021'
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