Publication:
Automotive Procurement Under Opaque Prices: Theory with Evidence from the BMW Supply Chain

Simple item page
dc.contributor.authorTurcic, Danko
dc.contributor.authorMarkou, Panos
dc.contributor.authorKouvelis, Panos
dc.contributor.authorCorsten, Daniel
dc.contributor.rorhttps://ror.org/02jjdwm75
dc.date.accessioned2024-07-02T16:11:31Z
dc.date.available2024-07-02T16:11:31Z
dc.date.issued2023-07-27
dc.description.abstractSeveral features of automotive procurement distinguish it from the prototypical supply chain in the academic literature: pass-through pricing that reimburses suppliers for raw material costs, market frictions that prohibit cost transparency and imbue suppliers with pricing power, and contractual commitments that span multiple production periods. In this context, we formalize a procurement model by considering an automaker that buys components from an upstream supplier to assemble cars over several production periods in an environment where period demands and raw material costs are both stochastic. Our paper clarifies how information asymmetry and market factors that amplify or weaken this asymmetry affect the firms’ procurement protocol preferences. Then, using proprietary contract and supplier data from BMW, we empirically validate this model and show that it reflects BMW’s reality: the factors that should theoretically go into automotive procurement decisions do so. Our analysis also reveals that existing contracting protocols in this context are not optimal for procurement under asymmetric information, and so we propose an alternative contracting method. We calibrate our model and estimate an automaker’s performance improvement from this optimal contract over the status quo.
dc.formatapplication/pdf
dc.identifier.citationTurcic, D., Markou, P., Kouvelis, P., & Corsten, D. (2024). Automotive procurement under opaque prices: Theory with evidence from the bmw supply chain. Management Science, 70(6), 3664-3683.
dc.identifier.doihttps://doi.org/10.1287/mnsc.2023.4880
dc.identifier.issn0025-1909
dc.identifier.urihttps://hdl.handle.net/20.500.14417/2905
dc.journal.titleManagement Science
dc.language.isoeng
dc.publisherInforms
dc.relation.entityIE University
dc.rightsAttribution Non-Commercial No-Derivatives 4,0 International
dc.rights.accessRightsinfo:eu-repo/semantics/openAccess
dc.subject.keywordAsymmetric information
dc.subject.keywordRisk management
dc.subject.keywordSupply chain
dc.subject.keywordAutomotive
dc.subject.keywordEmpirical
dc.subject.otherAsymmetric information;Risk management;Supply chain;Automotive;Empirical
dc.titleAutomotive Procurement Under Opaque Prices: Theory with Evidence from the BMW Supply Chain
dc.typeinfo:eu-repo/semantics/article
dc.version.typeinfo:eu-repo/semantics/acceptedVersion
dc.volume.numberEpub ahead of print
dspace.entity.typePublication
relation.isAuthorOfPublication12d316b7-c7f0-45df-97a3-ab72c009dbc5
relation.isAuthorOfPublication12d316b7-c7f0-45df-97a3-ab72c009dbc5
relation.isAuthorOfPublication.latestForDiscovery12d316b7-c7f0-45df-97a3-ab72c009dbc5
relation.isAuthorOfPublication.latestForDiscovery12d316b7-c7f0-45df-97a3-ab72c009dbc5
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
10641079.pdf
Size:
1.6 MB
Format:
Adobe Portable Document Format
Download
Collections
Research Articles