Gregor Berz , Evguenia Shprits: The Monetary Bonus System in Supplier Selections as Discriminated Borda Voting: Truth Telling by Vickrey-Clarke-Grove

In business practice, monetary Bonus Systems are increasingly being used to base supplier decisions not only on price but also on other decision-relevant criteria. Monetary Bonus Systems differ from conventional score matrices in the natural weighting of the criteria among each other. However, the problem of truthful evaluation still arises for the individual criterion if this cannot be calculated hard.

In addition to information deficits, internal stakeholders can also engage in tactical evaluation behavior. In this paper, we interpret the mechanism of supplier decisionmaking based on monetary Bonus Systems as a Discriminated Borda Voting mechanism between internal stakeholders and propose internal payments from stakeholders to the CFO, which turn this into an incentive-compatible mechanism according to Vickrey-Clarke-Grove. Finally, participation constraints and budget balancing is discussed briefly.

Part of the Munich Social Science Review, New Series, Volume 8 (2024)

The entire volume can be purchased online at this link.