Quality testing and product rationing by input suppliers

Arya, Anil, Gong, Ning and Ramanan, Ram N.V. 2014, Quality testing and product rationing by input suppliers, Production and operations management, vol. 23, no. 11, pp. 1835-1844, doi: 10.1111/poms.12186.

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Title Quality testing and product rationing by input suppliers
Author(s) Arya, Anil
Gong, NingORCID iD for Gong, Ning orcid.org/0000-0001-6454-7572
Ramanan, Ram N.V.
Journal name Production and operations management
Volume number 23
Issue number 11
Start page 1835
End page 1844
Total pages 10
Publisher Wiley
Place of publication Hoboken, N.J.
Publication date 2014-11-21
ISSN 1059-1478
Keyword(s) voluntary disclosure
quality testing
perceived quality
product rationing
Summary Quality testing by suppliers has significant ramifications for downstream supply chain participants and retail consumers. This article focuses on such implications accounting for the fact that suppliers often enjoy discretion in quality testing and reporting. Under a discretionary testing and reporting environment, we show that a supplier can improve the market's perception of product quality by engaging in self-imposed production cuts. Production cuts dampen supplier incentives to engage in excessive quality testing, putting the supplier and the market on a more equal information footing. This reduces the market's need to skeptically discount product quality to protect itself. The improved market perception, then, reduces quality testing demand, introducing cost savings. The result that costly production cuts can improve quality perceptions indicates that the groundwork for influencing market perceptions may have to be laid upfront, even prior to acquiring private information, providing a contrast to routine signaling models.
Language eng
DOI 10.1111/poms.12186
Field of Research 150205 Investment and Risk Management
1503 Business And Management
Socio Economic Objective 910499 Management and Productivity not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2013, Production and Operations Management Society
Persistent URL http://hdl.handle.net/10536/DRO/DU:30088293

Document type: Journal Article
Collections: Faculty of Business and Law
Department of Finance
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