Coordination of verification activities with incentives: a two-firm model

dc.contributor.authorKulkarni, Aditya U.en
dc.contributor.authorWernz, Christianen
dc.contributor.authorSalado, Alejandroen
dc.contributor.departmentIndustrial and Systems Engineeringen
dc.date.accessioned2020-12-03T17:54:51Zen
dc.date.available2020-12-03T17:54:51Zen
dc.date.issued2020-11-12en
dc.description.abstractIn systems engineering, verification activities evaluate the extent to which a system under development satisfies its requirements. In large systems engineering projects, multiple firms are involved in the system development, and hence verification activities must be coordinated. Self-interest impedes the implementation of verification strategies that are beneficial for all firms while encouraging each firm to choose a verification strategy beneficial to itself. Incentives for verification activities can motivate a single firm to adopt verification strategies beneficial to all firms in the project, but these incentives must be offered judiciously to minimize unnecessary expenditures and prevent the abuse of goodwill. In this paper, we use game theory to model a contractor-subcontractor scenario, in which the subcontractor provides a component to the contractor, who further integrates it into their system. Our model uses belief distributions to capture each firm's epistemic uncertainty in their component's state prior to verification, and we use multiscale decision theory to model interdependencies between the contractor and subcontractor's design. We propose an incentive mechanism that aligns the verification strategies of the two firms and using our game-theoretic model, we identify those scenarios where the contractor benefits from incentivizing the subcontractor's verification activities.en
dc.description.notesThis material is based upon work supported by the National Science Foundation under Grant Nos. CMMI-1762883 and CMMI-1762336. The authors thank the reviewers for their comments, which have significantly improved the manuscript, as well as for suggestion the durability example to contextualize the model setup presented in Sect. 4.en
dc.description.sponsorshipNational Science FoundationNational Science Foundation (NSF) [CMMI-1762883, CMMI-1762336]en
dc.format.mimetypeapplication/pdfen
dc.identifier.doihttps://doi.org/10.1007/s00163-020-00352-7en
dc.identifier.eissn1435-6066en
dc.identifier.issn0934-9839en
dc.identifier.urihttp://hdl.handle.net/10919/101002en
dc.language.isoenen
dc.rightsCreative Commons Attribution 4.0 Internationalen
dc.rights.urihttp://creativecommons.org/licenses/by/4.0/en
dc.subjectSystems engineeringen
dc.subjectVerificationen
dc.subjectTestingen
dc.subjectIncentivesen
dc.subjectMultiscale decision theoryen
dc.titleCoordination of verification activities with incentives: a two-firm modelen
dc.title.serialResearch in Engineering Designen
dc.typeArticle - Refereeden
dc.type.dcmitypeTexten
dc.type.dcmitypeStillImageen

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