Combating Child Labor: Incentives and Information Disclosure in Global Supply Chains
Manufacturing & Service Operations Management (2015)
42 Pages Posted: 21 Jan 2015 Last revised: 1 Jun 2018
Soo-Haeng Cho
Carnegie Mellon University - Tepper School of Business
Xin Fang
Singapore Management University - Lee Kong Chian School of Business
Sridhar R. Tayur
Carnegie Mellon University - David A. Tepper School of Business
Ying Xu
Singapore University of Technology and Design (SUTD)
Date Written: May 19, 2018
Abstract
Nearly 200 million children are engaged in child labor, many in developing countries that are part of the supply base of global manufacturing networks. This paper models a multinational firm in a developed country selling the product made by a supplier in a developing country. The firm can influence its supplier's use of child labor through its pricing and inspection. We find that the firm's pricing and inspection strategies work as strategic substitutes in combating child labor, so reducing the cost of inspections alone does not necessarily help to reduce child labor. When information about the firm's inspection policy is disclosed, the firm's inspection strategy can become more effective, but it may inadvertently induce more child labor unless the firm adopts a zero-tolerance policy against child labor. This problem persists even when the firm uses a deferred payment that is contingent on no child labor being found during inspections.
Keywords: Game Theory, Global Operations Management, Supply Chain Management
Suggested Citation: Suggested Citation
Soo-Haeng Cho (Contact Author)
Carnegie Mellon University - Tepper School of Business ( email )
Pittsburgh, PA 15213-3890
United States
Xin Fang

Singapore Management University - Lee Kong Chian School of Business ( email )
469 Bukit Timah Road
Singapore 912409
Singapore
Sridhar R. Tayur

Carnegie Mellon University - David A. Tepper School of Business ( email )
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
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