Research paper

Aligning the interests of newsvendors and forecasters through blockchain-based smart contracts and proper scoring rules

The paper proposes a proper scoring rule, tailored to the newsvendor's decision problem, that rewards a forecasting expert for higher effort, and shows that coding the rule as a blockchain-based smart contract lets the newsvendor signal trustworthiness while inducing the expert to exert more effort.

Paper

Overview

Publication metadata and narrative from the current library record.

Authors: Arthur Carvalho, Majid Karimi
Year: 2021
Venue: Decision Support Systems 151 (2021) 113626
Methodology: Design science research; formal analysis; Ethereum prototype (smart contract + DApp).
DOI: 10.1016/j.dss.2021.113626
Design knowledge: View design knowledge on GitHub

aligning-newsvendors-scoring-rulesblockchaindesign-science-researchforecastingsmart-contractssupply-chaintrust

Summary

Artifact

Blockchain-based smart contract implementing a tailored proper scoring rule for demand-forecast elicitation.

Methodology

Design science research; formal analysis; Ethereum prototype (smart contract + DApp).

DSR grid

Six dimensions represented in the current paper record.

Problem description

In a newsvendor setting, the interests of the newsvendor and the forecasting expert are misaligned, and trust issues arise because the expert's ex-post payment depends on forecast accuracy tied to a future outcome that may be known only to the newsvendor.

Input knowledge

Newsvendor/inventory theory and proper scoring rules; mechanism and incentive design; blockchain and smart contracts as prescriptive (design) knowledge.

Research process

Design science research: formal derivation of a tailored proper scoring rule, followed by design and implementation of an Ethereum smart-contract prototype and a decentralized application (DApp), with analytical demonstration.

Key concepts

Blockchain, forecasting, newsvendor, proper scoring rules, smart contracts, trust.

Solution description

A tailored proper scoring rule coded as a blockchain-based smart contract, with escrow/payment governed in a decentralized, party-independent manner. Solution-space representation: Instantiation (Ethereum prototype and DApp) plus design principles (nascent design theory).

Output knowledge

Three design principles - decentralized, party-independent control of the escrow/payment; enforceable, immutable algorithmic contracts; and an unambiguous source for the realized outcome - demonstrated with a working prototype.

Paper design map

The default semantic design map canonicalizes stored design relationships; Raw links retains the complete technical Markdown-link view.

Design-knowledge map

3 stored concepts / 0 canonical semantic relationships

Concept types

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Design knowledge

Directly linked concepts, grouped by their represented design-knowledge category.

3 Design Principles

design-knowledge/aligning-newsvendors-scoring-rules-dp1

DP1 - Decentralized, party-independent control of the escrow/payment

Payments should be handled by escrow accounts controlled by no individual entity.

aligning-newsvendors-scoring-rulesdesign-principleforecastingsmart-contracts+2

design-knowledge/aligning-newsvendors-scoring-rules-dp2

DP2 - Enforceable and immutable algorithmic contracts

Contracts between the newsvendor and the expert should be defined as enforceable and immutable algorithms.

aligning-newsvendors-scoring-rulesdesign-principleforecastingsmart-contracts+2

design-knowledge/aligning-newsvendors-scoring-rules-dp3

DP3 - Unambiguous source of the realized outcome

The source of the realized outcome must be unambiguous.

aligning-newsvendors-scoring-rulesdesign-principleforecastingsmart-contracts+2

Publication metadata

Additional metadata represented in the current library record.

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{
  "type": "paper",
  "title": "Aligning the interests of newsvendors and forecasters through blockchain-based smart contracts and proper scoring rules",
  "description": "The paper proposes a proper scoring rule, tailored to the newsvendor's decision problem, that rewards a forecasting expert for higher effort, and shows that coding the rule as a blockchain-based smart contract lets the newsvendor signal trustworthiness while inducing the expert to exert more effort.",
  "resource": "https://doi.org/10.1016/j.dss.2021.113626",
  "authors": "Arthur Carvalho, Majid Karimi",
  "year": 2021,
  "venue": "Decision Support Systems 151 (2021) 113626",
  "methodology": "Design science research; formal analysis; Ethereum prototype (smart contract + DApp).",
  "dsr_grid": true,
  "dsr_solution_space": "Instantiation (Ethereum prototype and DApp) plus design principles (nascent design theory).",
  "tags": [
    "aligning-newsvendors-scoring-rules",
    "supply-chain",
    "forecasting",
    "smart-contracts",
    "trust",
    "design-science-research",
    "blockchain"
  ]
}

Aligning the interests of newsvendors and forecasters through blockchain-based smart contracts and proper scoring rules

Summary

{ "type": "paper", "title": "Aligning the interests of newsvendors and forecasters through blockchain-based smart contracts and proper scoring rules", "description": "The paper proposes a proper scoring rule, tailored to the newsvendor's decision problem, that rewards a forecasting expert for higher effort, and shows that coding the rule as a blockchain-based smart contract lets the newsvendor signal trustworthiness while inducing the expert to exert more effort.", "resource": "https://doi.org/10.1016/j.dss.2021.113626", "authors": "Arthur Carvalho, Majid Karimi", "year": 2021, "venue": "Decision Support Systems 151 (2021) 113626", "methodology": "Design science research; formal analysis; Ethereum prototype (smart contract + DApp).", "dsr_grid": true, "dsr_solution_space": "Instantiation (Ethereum prototype and DApp) plus design principles (nascent design theory).", "tags": [ "aligning-newsvendors-scoring-rules", "supply-chain", "forecasting", "smart-contracts", "trust", "design-science-research", "blockchain" ] }