Browsing by Subject "Financing contracts"

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Essays on novel applications of financing contracts
(2022-06-15) Martin, Paola, Ph. D.; Gupta, Diwakar; Gilbert, Stephen M; Muthuraman, Kumar; Mehrotra, Mili
This thesis comprises essays on three novel applications of financing contracts with the objective to improve supply chain efficiency. The first application concerns the procurement of vaccines for developing countries. Because pharmaceutical companies are reluctant to commit capacity and produce vaccines for developing countries, Global Health Organizations (GHOs) have proposed subsidy contracts to induce the manufacturing of such vaccines. In this context, we answer the question of how should an optimal contract be designed when the GHO is subject to different budget constraints. The second application revolves around supplier financing of retailer's inventories when retailer's sales are not observed by the supplier. In such situations, the supplier can either require the retailer to share sales information, or she can verify the retailer's sales by incurring a cost. We study whether there exist problem primitives under which the supplier could realize a higher profit by learning the retailer's sales through costly verification. The third application considers a more general business interaction between a Principal and an Agent. The Agent observes the business' proceeds but the Principal does not. However, she can learn it via costly verification. Moreover, the Principal may also not observe the effort of the Agent. The research question in this setting is whether the Principal can benefit from costly as opposed to cost-free verification. We also analyze the impact of different ways of splitting the verification costs between the two players. Each of the three essays proposes a framework within which to answer the respective research questions via analyses of equilibrium decisions of two strategic partners in a leader-follower game. This thesis contributes to the literature on Principal-Agent models by showing that the optimality of different contracts depends on the type of budget constraint and that costly verification can improve the profit of both the supplier (the Principal in Essay 3) and the retailer (the Agent in Essay 3) under information opacity about sales (the outcome of the business transaction in Essay 3).