Title: The Coordination Mechanism of Supply Chain with Bilateral Asymmetric Costs Information
Abstract: Bilateral asymmetric information in supply chains has become a common phenomenon. The party who possesses information often conceals his information for better performance,resulting in the inefficiency of supply chain. Therefore,it is worthwhile to investigate the coordination mechanism for improving information sharing and the whole supply chain performance. This paper addresses the coordination of supply chain with bilateral asymmetric information. More specifically,we consider a supply chain consisting of one manufacturer and one retailer which have their private information regarding the manufacturing cost and retail cost respectively.In the first part,we review studies on the supply chain with asymmetric information. We find that information sharing mechanism has attracted substantial attention of many scholars. However,only a few researchers are motivated to explore supply chain coordination mechanisms under the bilateral asymmetric information scenario.In the second part,we investigate how the manufacturer and the retailer reveal information to each other and how they achieve supply chain coordination under the bilateral information situation. To improve the operational efficiency,we introduce the benevolent principal concept. Thus,the whole supply chain can be seen as a coordination subject. To solve the problem of asymmetric information revealing,we first introduce the AGV( d'Aspremont and Gerard-Varet) mechanism and construct a model based on the mechanism. In the centralized situation,the optimal commodity trading quantity is used as a benchmark. In the decentralized setting,we prove that the private information is revealed truthfully by using the AGV mechanism. Meanwhile,the manufacturer and retailer will maximize their individual profit by announcing the true cost information. Thus the optimal commodity trading quantity determined by the private cost information equals to the optimal commodity trading quantity in the setting of symmetric information. Therefore,supply chain coordination can be achieved. In the third part,we propose the coordination mechanism( an ex ante contract) by specifying commodity trading quantity. This mechanism can help improve transfer payments for the manufacturer and the retailer. In our model,the IR( individual-rationality) constraints are neglected and the nonnegative profits of the manufacturer and the retailer can not be guaranteed. In order to overcome the issue,we present an ex-post allocation rule associated with their expected information rent. Additionally,the improved transfer payments are designed as an extension of the transfer payments adopted in the AGV mechanism. Based on the improved transfer payments,a coordination mechanism which includes the commodity trading quantity determined by the costs information and the improved transfer payments is proposed. We prove that the mechanism not only reveals the private information truthfully but also allocates profit reasonably. Finally,one numerical example is presented to explain the main results. We demonstrate that the expected profit of the manufacturer and the retailer are approximately equal to the realized profit of the manufacturer and the retailer. It shows that the designed coordination mechanism is reasonable and effective. Future research can focus on the asymmetric market demand distribution as well as the impact of risk attitude on the supply chain members.
Publication Year: 2013
Publication Date: 2013-01-01
Language: en
Type: article
Access and Citation
Cited By Count: 3
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot