Date: 01 June 2026, Monday
Time: 13.30 – 14.30
Place: MA-330
“Contract Design for Coffee Supply Chain Coordination under Uncertainty and Strategic Default“
by
Mert Hakan Hekimoğlu
Rensselaer Polytechnic Institute
Abstract
In many agricultural supply chains, particularly in emerging economies, trade occurs under significant price and yield uncertainty. Farmers must commit resources at the beginning of the crop season, while wholesale prices at harvest remain uncertain. Forward contracts are commonly used to secure supply and manage risk, but when market prices rise sharply, farmers may strategically default and sell on the spot market instead. The international coffee market provides a salient example, where recent high-price episodes in Colombia have triggered delivery shortfalls and breaches of forward contracts.
Motivated by these disruptions, we study contract design when farmers can strategically default under price and yield uncertainty, and buyers face costly supplier replacement. We develop a sequential Stackelberg buyer-supplier model in which the buyer offers a forward contract with a fixed price, an upfront payment invested by the farmer to improve yield, and a default penalty linked to the upfront payment. At harvest, the farmer decides whether to comply or default after observing realized yield and wholesale prices.
We obtain three main results. First, strategic default follows a wholesale-price threshold rule: farmers default only when realized prices exceed a critical level, which increases with both upfront payments and penalties. Second, upfront liquidity expands feasible penalties and can improve participation, compliance, and expected payoffs relative to penalty-only contracts. Third, the interaction between participation incentives, default risk, and buyer replacement costs generates distinct regions of partial compliance, full compliance, and no contracting.
Bio
M. Hakan Hekimoglu is an Associate Professor of Supply Chain and Analytics at the Lally School of Management, Rensselaer Polytechnic Institute. In 2025, he has been appointed as James M. Tien ’66 Dean’s Faculty Fellow in recognition of his contributions to advancing the frontiers of research and education in Decision Sciences and Engineering Systems. Dr. Hekimoglu holds a PhD degree in Supply Chain Management from Syracuse University. He has received his BS in Industrial Engineering and MS in Finance from Bilkent University in Ankara, Turkey, and his MA in Economics from Syracuse University.
Dr. Hekimoglu’s research addresses interdisciplinary problems at the interface of supply chain management, finance and analytics with an emphasis on managing uncertainty and risk in complex supply chain problems. As a versatile researcher, he employs both mathematical and empirical methodologies in formulating and analyzing problems that exhibit disruption risk as well as uncertainties in various forms (e.g., supply, demand, quality, price, information). Industry collaborations have a key role in his process of developing practically relevant research questions.
Dr. Hekimoglu has published papers in prominent journals such as Manufacturing & Service Operations Management, Production and Operations Management, and Decision Sciences. He has been the recipient of several awards and honors: Appointed as James M. Tien ’66 Dean’s Faculty Fellow (2025), Recipient of the A. W. Lawrence Junior Development Fellowship (2020), runner-up in the MSOM iFORM Best Paper Award (2018), awardee at the Trustee Celebration of Faculty Achievement at Rensselaer Polytechnic Institute (2025, 2023, 2017), and recipient of the Best Published Paper Award from Lally School of Management (2016). Dr.
Hekimoglu’s research has also been featured in prestigious non-academic outlets including Forbes, RobertParker.com, and London International Vintners Exchange (Liv-ex).