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AI and Procurement

Thursday, July 14, 2022

11:00 am - 12:00 pm

About the Event

In the paper “AI and procurement,” we explore how AI creates and delivers value in procurement. AI has two unique abilities: automation and smartness, which are associated with physical machines or software that enable us to operate more efficiently and effectively. In this research, we study how buyers’ usage of AI affects suppliers’ price quoting strategies. Specifically, we study the impact of automation—i.e., the buyer uses a chat-bot to automatically inquire prices instead of asking in person—and the impact of smartness—i.e., the buyer signals the usage of a smart AI algorithm in selecting the supplier. We collaborate with a trading company to run a field experiment on an online platform in which we compare suppliers’ wholesale price quotes across female, male, and chat-bot buyer types under AI and no recommendation conditions. We find that, when not equipped with a smart control, there is price discrimination against chat-bot buyers who receive a higher wholesale price quote than human buyers. However, signaling the use of a smart recommendation system can effectively reduce suppliers’ price quote for chat-bot buyers. We also show that AI delivers the most value when buyers adopt automation and smartness simultaneously in procurement.


About the Speaker

Meng Li is an Associate Professor and Bauer Fellow of the C.T. Bauer College of Business at the University of Houston. His research has appeared in Management Science, Manufacturing and Service Operations Management, Production and Operations Management, and Strategic Management Journal, among others. His research has won the Best Paper for the POMS College of Operational Excellence Best Paper Competition, and the Second Place of JFIG Paper Competition. He is a guest editor for Production and Operations Management and Decision Sciences Journal, an Editorial Board Member for JOM, a Senior Editor for Production and Operations Management, and an Associate Editor for Decision Sciences Journal. 


Online Only

Ishita Sharma