Fleet Coordination in Decentralized Humanitarian Operations Funded by Earmarked Donations

We study incentive alignment for the coordination of humanitarian operations. Transportation is the second-largest overhead cost (after personnel) for international humanitarian organizations (IHOs). Yet, the management of IHO vehicle fleets faces obstacles to reach efficiency, due to a structural conflict between the incentives of an IHO’s individual program (which prioritize prompt service and minimal program cost) and the IHO’s central headquarters (which on top of the objective of the program is also responsible for the running costs of the entire fleet). In recent years, the headquarters has been further limited by a trend toward donors earmarking their funding. This problem is further complicated by information asymmetry in the system due to the dispersed geographical locations of the programs. Assuming these real-world conditions, grounded in field research, we design a novel mechanism to align incentives. Interestingly, the standard result of “no output distortion and positive information rent for the efficient type” in adverse selection models does not hold in our setting. We obtain three parameter-dependent regions for truth revelation and link these regions to the type of activities carried out by different programs.