Hubert Pun

• Yuan, M.; Pun, H.; Guan, X., 2022, "Information Disclosure in a Supply Chain with Copycat Threat", European Journal of Operational Research
  Abstract: Outsourcing is a common operations strategy nowadays, but it may lead to an unintended consequence of supplier copycatting. When outsourcing, there is some subtle information that the manufacturer knows but is optional for the supplier to carry out the production task, such as how fit this product is to the market trend (product fit). This paper considers a game setting that the manufacturer has private information on product fit during the production stage, and it decides whether or not to disclose this piece of information to the supplier. The supplier decides whether or not to exert production process enhancement effort and whether or not to enter the market with a copycat. We discover two novel disclosure structures: (1) only disclosing the intermediate range of product fit information, and (2) always withholding information even though disclosure is costless. We find that the manufacturer can be better off, while the supplier can be worse off, from the supplier copycatting option. Our work lends support to the practitioners' recommendation that the manufacturer should withhold some crucial information from the supplier and keep the communication as basic as possible and uncovers the bright side of supplier's copycat on the manufacturer's profitability.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.ejor.2022.01.027

• Kashef, R.; Pun, H., (Forthcoming), "Predicting l-CrossSold products using connected components: A clustering-based recommendation system", Electronic Commerce Research and Applications, December 53: 101148 - 101148.
  Abstract: Recommender systems (RSs) are an integral part of the online retail industry. They create tremendous potentials for cross-selling, including increasing sales revenue, improving consumer fulfillment, increasing customer lifetime value, controlling product consumption to optimize resources, and dynamically adapting to consumer behaviors. Online retailers have relied on the position and presence of RSs to assist users in better decision-making and thereby increase their revenues. However, with dynamic changes in consumer behavior patterns, the quality and accuracy of recommendations have become a significant challenge for e-commerce retailers. Moreover, with the rapid evolution of online data, most RSs suffer from data sparsity and scalability problems. This paper introduces a new model of applying clustering analysis concepts to RSs along with advancements in graph theory to react effectively to user changes and business challenges in the the online retail industry. A clustering-based RS using the notion of the cross-sold score—namely, “”—is proposed and tested with the aim of enhancing the quality of recommendations, handling data sparsity, improving consumer profiling and addressing scalability in the current recommendation methods in order to generate a more practical set of personalized recommendations. The proposed algorithm shows a significant improvement in both the prediction accuracy and the speedup as compared to the state-of-art collaborative filtering RSs, clustering-based collaborative filtering RSs, and rule-based RSs.

  Link(s) to publication:

  https://www.sciencedirect.com/science/article/pii/S1567422322000321

  http://dx.doi.org/10.1016/j.elerap.2022.101148

• Pun, H.; Hou, P., (Forthcoming), "Combating copycatting from emerging market suppliers", Production and Operations Management
  Abstract: We examine how different strategies can be used to protect global manufacturers from the prevalent issue of supplier copycatting in emerging markets. In particular, using a game theoretical model, we consider a manufacturer that sells a product to an emerging market, which requires the completion of multiple tasks. The manufacturer can perform any of these tasks in-house or outsource any of them to an emerging market supplier. The former approach carries a higher cost, while the latter puts the manufacturer’s intellectual property (IP) at risk of supplier copycatting. Either the manufacturer or the emerging market government can exert enforcement effort to protect the IP rights within the supply chain. Our results show that, surprisingly, there are cases where the manufacturer should outsource fewer tasks when in-house production is more costly. Further, even though the supplier is the target of the enforcement, we show that the manufacturer’s enforcement effort can help the supplier but hurt customers and the emerging market. Concerning whether the government or the manufacturer should take responsibility for IP protection, we recommend that the government enforce IP protection when the manufacturer has a weak brand quality, and that the manufacturer enforces IP protection when it has a strong brand. This managerial insight provides a theoretical framework to the recent practitioners’ debate about who should be responsible for protecting IP rights within the supply chain.
• Chen, J.; Pun, H.; Zhang, Q., (Forthcoming), "Eliminate Demand Information Disadvantage in a Supplier Encroachment Supply Chain with Information Acquisition", European Journal of Operational Research
  Abstract: The retailer, who is closer to customers, usually has more information on demand than its manufacturer does. This paper focuses on a manufacturer’s information acquisition strategy in a supply chain, and the design of the first-best contract to achieve a win-win for the manufacturer and its retailer. We consider a manufacturer encroachment supply chain in which the manufacturer sells products both directly to the consumer and indirectly through a retailer. The retailer has private demand information while the manufacturer has the option of acquiring demand information. The manufacturer sets the retail price in its direct channel, and the retailer sets the retail price in the retail channel. We consider the two retail price leadership cases, either the manufacturer decides the retail price first or the retailer decides the retail price first. We find that the manufacturer can be hurt by acquiring information, even when the cost is negligible, because competition between the two channels is intensified. Moreover, while one might expect that the retailer is better off from having more information, we show that the retailer can in fact benefit when the manufacturer acquires information. Lastly, we find that the retailer may be worse off from being the retail price leader when the manufacturer acquires demand information, and price competition can be intensified if more customers prefer the direct channel (indirect channel) when the manufacturer (the retailer) acts as the price leader.
• Raz, G.; Druehl, C.; Pun, H., 2021, "Co-development versus Outsourcing: Who Should Innovate in Supply Chains", IEEE Transactions on Engineering Management
  Abstract: Outsourcing has long been a strategy to decrease cost. Increasingly firms recognize the value in their supply chains and call on suppliers to innovate, both in products and processes. Innovation to increase quality and demand or to reduce costs is critical to firm and supply chain success. In a two-stage supply chain, we investigate the impact of focal firm and supplier innovation costs (and capabilities) on the type of outsourcing chosen and the resulting investments in process and product innovation. The focal firm determines whether to perform design (including product innovation in the form of quality enhancement) and manufacturing (including process innovation in the form of cost reduction) in-house, to outsource manufacturing/process innovation while insourcing design/product innovation, to outsource both manufacturing/process innovation and design/product innovation, or to co-develop product innovation while outsourcing manufacturing/process innovation. We also examine the conditions under which co-development is favorable given the supply chain faces potential positive and negative synergies from either the co-location of the innovation activities or costs of collaboration. After characterizing the optimal outsourcing decision, we find that the decision to outsource is more nuanced than simply which activities to outsource, but must include options to collaborate on particular activities, and specifically product innovation. We offer the insight to managers that co-development, despite costs of collaboration, can benefit the firm and result in higher profits. This occurs through the improvement of demand via higher quality products.

  Link(s) to publication:

  https://ieeexplore.ieee.org/document/9481175

  http://dx.doi.org/10.1109/TEM.2021.3086421

• Ghamat, S.; Zaric, G. S.; Pun, H., 2021, "Care-coordination: Gain-sharing Agreements in Bundled Payment Models", Production and Operations Management, June 30(5): 1457 - 1474.
  Abstract: We study gain-sharing agreements in a target price-minimum quality payment system. Our work is inspired by the Centers for Medicare and Medicaid Services’ (CMS) Comprehensive Care for Joint Replacement (CJR) bundled payment model. In our model, patients receive care from a hospital and a post-acute care provider. A third-party payer establishes target levels for total billing by the hospital and provider, and a target on the overall quality of care. The hospital and provider receive fee-for-service (FFS) billings during an episode of care, defined as the period that starts with an admission of a patient to the hospital and ends 90 days post-discharge. The hospital may also receive an incentive payment if total FFS billing by both parties is below the target price and total quality by both parties is above the minimum quality. The goal of the incentive payment is to encourage hospitals to enter into “gain-sharing” agreements with providers. We model the interactions between the three parties. We show that while using a gain-sharing agreement might be a “win-win-win” scenario for the three parties, good design of the payment scheme by the payer is essential to incentivize a hospital to participate in the bundled payment model (e.g., CJR) and sign a gain-sharing agreement with the provider. Furthermore, we illustrate that a target price-minimum quality bundled payment model would be more effective, in care-coordination, in healthcare settings where the provider is much more effective than the hospital in reducing its billing.

  Link(s) to publication:

  http://dx.doi.org/10.1111/poms.13332

• Ghamat, S.; Pun, H.; Critchley, G.; Hou, P., 2021, "Using Intellectual Property Agreements in the Presence of Supplier and Third-party Copycatting", European Journal of Operational Research, June 291(2): 680 - 692.
  Abstract: When a manufacturer outsources the production of a product, it distributes its intellectual property (IP) into a supply chain that it may not be able to fully control. An IP agreement between a manufacturer and its suppliers is a popular solution to address the challenge of supplier-copycatting. The goal of this paper is to examine the impact of copycatting, from both the supplier and third-party firms, and the effectiveness of an IP agreement. Specifically, we use a game-theoretic approach to examine a system where a manufacturer outsources to a supplier. The supplier and a third-party firm decide whether or not to enter the market with copycat products while the manufacturer selects the level of marketing investment. The manufacturer can reduce the threat of supplier-copycatting by signing an IP agreement. However, we find that the manufacturer can be worse off from signing an IP agreement with its supplier, even if the IP agreement is costless and perfectly enforceable. We show that a manufacturer can deter copycat products through vertical integration and IP agreements and we outline the instances where each method is preferred. Furthermore, we find that the manufacturer may choose not to invest in quality improvements as a copycat deterrence strategy. We show that the supplier can benefit from the manufacturer’s decision to sign an IP agreement and that the supplier and the consumers can benefit from IP regulations against copycat products. Our paper demonstrates the strengths and limitations of various copycat deterrence strategies when a supplier and third-party may produce copycat products.

  Link(s) to publication:

  https://www.sciencedirect.com/science/article/pii/S0377221720308456

  http://dx.doi.org/10.1016/j.ejor.2020.09.041

• Pun, H.; Swaminathan, J. M.; Hou, P., 2021, "Blockchain Adoption for Combating Deceptive Counterfeits", Production and Operations Management, May 30(4): 864 - 882.
  Abstract: Counterfeiting is a severe problem in many sectors. There are two types of counterfeits: non-deceptive and deceptive. While both types are important business challenge, deceptive counterfeit have an additional negative impact – customers have a post-purchase regret if they expect to purchase a real product but ended up with a fake. The focus of this paper is on the setting that relates to deceptive counterfeits. Our paper is one of the first that examines the effectiveness of blockchain as a solution to a supply chain challenge. Specifically, the unique feature of blockchain that we model, which none of the traditional strategies studied in the literature is capable of, is that blockchain adoption changes the analysis from a deceptive counterfeit setting to a non-deceptive counterfeit setting. We also consider government being a decision maker and customers’ privacy concern from blockchain adoption, two features that are not examined in the existing literature. We consider a market with a manufacturer and a deceptive counterfeiter. The manufacturer can signal product authenticity either with blockchain technology or through pricing. The government can provide subsidy to encourage blockchain adoption. Blockchain should be used when the counterfeit quality is intermediate or when customers have intermediate distrust about products in the market. When customers have serious distrust about products, differential pricing strategy is more effective than blockchain adoption. If government provides subsidy, blockchain can be more effective than differential pricing strategy in eliminating post-purchase regret. Our results advocate for government providing subsidy because it benefits both customers and the society and could be a better approach than government enforcement efforts.

  Link(s) to publication:

  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3223656

  http://dx.doi.org/10.1111/poms.13348

• Ovchinnikov, A.; Pun, H.; Raz, G., 2021, "The impact of inventory risk on market prices and profits", Decision Sciences
  Abstract: Firms often must procure inventory/capacity before knowing what the demand will be, so there is a potential for a mismatch between inventory and demand, the “inventory risk.” We show that because of inventory risk, an increase in the number of competitors can lead to an increasing trend in market prices. Furthermore, we show that, ceteris paribus, because of how inventory risk impacts competitive behavior, firms may prefer to incur inventory risk rather than to avoid it. To illustrate the robustness of our results, we establish these findings using three complementary methodologies: (i) using data from a classroom experiment, (ii) using a quantal response equilibrium simulation to capture realistic irrationalities in managerial decisions under competition, and (iii) using a fully-rational Nash equilibrium model to capture the impact of the competition per se. That all three methods lead to identical qualitative findings reinforces the main message of our paper: inventory risk reverses the standard intuition for how an increase in the number of competitors impacts prices.

  Link(s) to publication:

  https://onlinelibrary.wiley.com/doi/10.1111/deci.12520

  http://dx.doi.org/10.1111/deci.12520

• Hou, P.; Pun, H.; Li, B., 2021, "To Collaborate or Not: Product Upgrading Strategy in a Competitive Duopoly Market", IEEE Transactions on Systems, Man, and Cybernetics: Systems: 1 - 14.
  Abstract: Releasing an upgraded version of a product is a common tactic that firms use to maintain competitiveness. However, in light of the significant research and development investment required to upgrade products, a new industry trend has emerged in which incumbents collaborate with market entrants to innovate products. At the same time, such collaboration may lead customers to think that the upgraded products are more similar than those innovated without collaboration. Consequently, we consider the following tradeoff: collaboration allows firms to share the innovation investment, but leads to less differentiated products. Specifically, we consider a two-period model where the incumbent is a monopoly during the first period. This incumbent and a market entrant decide whether or not to collaborate to innovate their products, and the two firms sell their products during the second period. We find that both firms can benefit from a higher innovation cost. Moreover, the market entrant can be better off when the products become less differentiated due to collaboration, or when customers are impatient to buy in the second period. Finally, we find customers can be worse off when there is a lower innovation cost or more differentiated products.

  Link(s) to publication:

  https://ieeexplore.ieee.org/document/9383179

  http://dx.doi.org/10.1109/TSMC.2021.3061817

• Pun, H.; Chen, J.; Li, W., 2020, "Channel Strategy for Manufacturers in the Presence of Service Freeriders", European Journal of Operational Research, December 287(2): 460 - 479.
• Wu, C.; Zhang*, Y.; Pun, H.; Lin*, C., 2020, "Partner selection criteria construction in sustainable supply chains: A systematic optimization model", Expert Systems with Applications, November 158
• Hou, P.; Zhen, Z.; Pun, H., 2020, "Combating Copycatting in the Luxury Market with Fighter Brands", Transportation Research Part E: Logistics and Transportation Review, August 140
• Chen, J. Y.; Dimitrov, S.; Pun, H., 2019, "The impact of government subsidy on supply Chains’ sustainability innovation", OMEGA-INTERNATIONAL JOURNAL OF MANAGEMENT SCIENCE, July 86: 42 - 58.
  Abstract: Motivated by recently observed industry and government practices, in this paper we endogenize government subsidy in a research joint venture (RJV). In particular, we present a three-player game in which a government determines the amount of subsidy for a supply chain consisting of a manufacturer and a retailer conducting an RJV on a sustainable product. In addition to the retail and wholesale pricing decisions, the firms must determine the level of innovation effort as well as the division of innovation costs between the partners. In our analysis we consider two forms of RJV formation (retailer and manufacturer initiated) and two types of subsidy (per-unit production subsidy and innovation effort subsidy). We find that: (a) the government should never use both types of subsidies simultaneously for any cost-reduction research and development (R&D) effort, (b) whenever effort subsidy is present the government is indifferent as to how the RJV is formed, and (c) even though firms benefit most from initiating the RJV in many cases, the manufacturer is worse off by initiating the RJV if R&D effort increases per-unit production cost, innovation or production cost is high and only per-unit production subsidy is present.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.omega.2018.06.012

• Ghamat, S.; Zaric, G. S.; Pun, H., 2018, "Contracts to promote use of optional diagnostic tests in cancer treatment", Production and Operations Management, December 27(12): 2184 - 2200.
  Abstract: In this paper we examine performance-based payment contracts to promote the optimal use of an optional diagnostic test for newly diagnosed cancer patients. Our work is inspired by three trends: tremendous increases in the cost of new, advanced cancer drugs development of new diagnostic tests to allow physicians to tailor treatment to patients and changes in healthcare funding models that reward quality care. We model the interaction between two partiesa healthcare payer and an oncologist, in which the oncologist has private information about patients’ characteristics (adverse selection) and the payer does not know whether the oncologist takes the optimal course of action (moral hazard). We show that, in the presence of information asymmetry, a healthcare payer should never incentivize an oncologist to use a diagnostic test for all patients, even if the diagnostic test is available for free. Moreover, although the oncologist has additional information about a patient’s risk, he cannot always benefit from this private information. We also find that social welfare may not increase as a result of a decrease in the oncologist’s concerns regarding the health outcome of patients. Finally, we show that it is not always socially optimal to make a diagnostic test compulsory even if such a policy can be implemented for free.

  Link(s) to publication:

  http://dx.doi.org/10.1111/poms.12780

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