Suppliers operating in developing economies may resort to compelling their workforce to engage in excessive overtime, resulting in severe physical and mental health issues for workers and the potential for significant damage to the brand image of multinational enterprises (MNEs) if these practices are exposed to the public. In this paper, we develop a game-theoretic model of a dyadic supply chain to analyze a manufacturer’s operational strategies to combat the use of excessive overtime by a supplier. These strategies encompass a stick strategy of auditing the supplier’s practice (i.e., the auditing strategy) and carrot supplier development strategies of subsidizing the supplier’s workforce retention initiative (i.e., the workforce retention subsidy strategy) and upskilling the supplier’s workers to increase their versatility (i.e., the cross-training strategy). When auditing stands as the sole viable strategy, it can effectively mitigate the supplier’s violation behavior only when the auditing accuracy is significant. In the scenario where both workforce retention subsidy and auditing are viable, interestingly, workforce retention subsidy may be a complement for auditing, contrary to the naive belief that the strategies are always substitutes in combating excessive overtime. Compared with the case when auditing is the sole viable strategy, we find that workforce retention subsidy may increase the manufacturer’s profit and reduce the supplier’s overtime simultaneously. However, the subsidy may also backfire, increasing the expected degree of excessive overtime and decreasing social welfare, when workforce retention subsidy and auditing are substitutes. Furthermore, the workforce retention subsidy could lead to a social welfare level that is even higher than that in a centralized supply chain benchmark without the workforce retention subsidy. In situations where both cross-training and auditing are viable, cross-training may also be a complement for auditing, driven by the enhanced flexibility of the workforce. However, similar to the workforce retention subsidy, cross-training may lead to a win-win outcome or backfire. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: C. Jiao was partially supported by the National Natural Science Foundation of China Grants 72301261, 72531009, 72188101, 72471218 and the China Scholarship Council. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.03852 .
Jiao et al. (2026) studied this question.