| This thesis examines the effect of private information in the coordination of production planning and allocation decisions in High-tech Manufacturing Organizations (HTMOs). These organizations confront cost-based and time-based competition, and have to make coordination decisions based on private and/or imperfect information. To analyze the coordination of HTMOs, we use a simple model of a stylized HTMO consisting of a headquarters function (HQ), a manufacturing division with uncertain production yields, and an assembly-marketing division that sells a final product for which demand is uncertain. Our mathematical formulation accounts for production, salvage, and backlog costs which are standard considerations in Operations Management research; it also accounts for the effect of private information of the divisions which is a factor of concern in Economics research.; We compare the efficiency of three coordination policies; each policy has its own information flow, responsibility-domain for each division, and incentive structure for the division managers. In the first policy, a centralized command and control policy, HQ rewards the managers through flat wages and global profit sharing, and makes decisions ignoring managers' incentive to distort their private information. In the second policy, a centralized revelation policy, HQ offers the managers informational rents to access their private information and then makes coordination decisions. In the third policy, a decentralized revelation policy, HQ offers the managers informational rents proportional to the realized profit of their divisions, delegates to the divisions production planning and resource allocation decisions, and coordinates their decisions through transfer prices and changes in the price-cost structure used to evaluate the profit of the divisions.; Our results show that the centralized revelation policy is more efficient than the centralized command and control policy. They also show that if there is no physical or economic limitation in the communication between headquarters and the divisions, centralization is more efficient that decentralization; the difference between the two arises because of higher informational rents and because each division make decisions considering only the uncertainty within its division. On the other hand, if there are communication limitations, which are likely in HTMOs, decentralized revelation may be the best policy. Finally, we propose some general guidelines for reducing the adverse effects of decisions making with private and/or imperfect information in HTMOs. |
