Title: Optimisation Models for Supply Chain Coordination under Information Asymmetry
Abstract:In a supply chain consisting of individualistic parties, the sharing of information is not always beneficial
to each party. If a party discloses his private information it could undermine his bargain...In a supply chain consisting of individualistic parties, the sharing of information is not always beneficial
to each party. If a party discloses his private information it could undermine his bargaining position in
the supply chain. Consequently, there is no incentive to share information, which results in information
asymmetry between the involved parties. We consider a two-echelon supply chain setting viewed from
the upstream party’s perspective, who faces an individualistic downstream party with private information.
The upstream party uses mechanism-design techniques to maximise his own benefit by designing a menu
of contracts, which is offered to the downstream party. Each contract specifies the procurement plan for
the supply chain and a side payment. These side payments are the incentive mechanism to persuade the
downstream party to accept a contract from the menu.
We consider this principal-agent contracting problem for several utility maximisation or cost minimisation
problem settings. The goal is to determine a menu of contracts that is the most beneficial to the upstream
party, whilst still being acceptable for the downstream party. To achieve this goal, we analyse a variety of
optimisation models, which differ in the requirements of the menu of contracts. Our analysis provides
insights into modelling approaches, structural properties of optimal menus, and solution methods.Read More
Publication Year: 2018
Publication Date: 2018-10-05
Language: en
Type: article
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