On explicit solutions of a two-echelon supply chain coordination game

Date
2018
Advisor
Instructor
Source Title
Optimization Letters
Print ISSN
1862-4472
Electronic ISSN
Publisher
Springer Verlag
Volume
12
Issue
3
Pages
661 - 673
Language
English
Type
Article
Journal Title
Journal ISSN
Volume Title
Abstract

A contracting game under asymmetric information specific to two-echelon supply chain coordination between a retailer of unknown type and a supplier is studied. When the parameter which is private information to the retailer (holding cost) is known up to an interval of uncertainty, a uniform discrete approximation for retailer types leads to closed-form solutions where the joint (coordinated) optimal order quantity for a modified holding cost plays a major role. Furthermore, the closed-form solutions result in increasing information rent for higher types under easy-to-verify conditions involving strict lower limits on the total holding costs of retailer and supplier and the difference between uncoordinated optimal costs of consecutive retailer types.

Course
Other identifiers
Book Title
Keywords
Convex optimization, Incentives, Principal-agent problem, Two-echelon supply chain coordination
Citation
Published Version (Please cite this version)