Incentive design with customer satisfaction for business process outsourcing: multi-taskvs. multi-agent

Abstract

We study the incentive design decision of a firm that outsources its online marketing and operational business lines to professional external and internal service providers under the principal-agent framework. Customer satisfaction is represented as the composite of the agents' sales and qualitycontrol efforts via the disconfirmation model, and is introduced into the demand model and incentive contracts. Two scenarios corresponding to whether the brand owner delegates business to a single agent or to multiple agents are studied. We derive the brand owner's optimal contracts and the agents' effort levels and conduct extensive sensitivity analyses regarding the influences of model parameters. We find that increases in the measure accuracy of customer satisfaction can bring significant benefit to the firm's profitability, and explore how it is affected by system factors. Specifically, the benefit is more substantial when the marginal cost of quality-control effort is relatively smaller than the marginal cost of sales effort. An interesting discovery is that the brand owner always earns more profit by outsourcing business to multiple agents than to a single agent, mainly because of his inflexibility in reaching a balance between inducing higher effort levels and providing a sufficient risk premium in the singe-agent case. This profit gap can be expanded by incentivizing both agents on customer satisfaction measures, and is shown quite significant under certain settings in the numerical studies.

Decision-Making Approach for an IoRT-Aware Business Process Outsourcing

“…To estimate the security value of a SESE fragment, we start first at the estimation of the security value for a process task Sec(a i ) (see Equation (10)) that is calculated according to the number of the environment Env protection nb_CorrectedTH and the number of the threats thr that exist nb_ExistenceTH (see Equations ( 8) and ( 9)). Based on the Sec(a i ) of tasks values that constitute a SESE, we proposed Equation (11) to estimate the SESE security value Sec(SESE), which is expressed in percentage.…”

“…Our extensive literature exercise revealed that most of the existing approaches deal mainly with the decision-making of traditional BPs, such as [7][8][9][10][11][12][13]. Some recent works have addressed the decision-making of the BPs that embedded only the IoT technology (e.g., [14][15][16]).…”