Information Economics and Policy
Diversification under supply uncertainty
Management Science
Producer-Supplier Contracts with Incomplete Information
Management Science
Information, Contracting, and Quality Costs
Management Science
Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments
Manufacturing & Service Operations Management
Designing Supply Contracts: Contract Type and Information Asymmetry
Management Science
On the Value of Mix Flexibility and Dual Sourcing in Unreliable Newsvendor Networks
Manufacturing & Service Operations Management
Association Between Supply Chain Glitches and Operating Performance
Management Science
Efficient Auction Mechanisms for Supply Chain Procurement
Management Science
Optimal Mechanisms with Finite Agent Types
Management Science
Competition and Diversification Effects in Supply Chains with Supplier Default Risk
Manufacturing & Service Operations Management
Impact of Supply Learning When Suppliers Are Unreliable
Manufacturing & Service Operations Management
RFQ Auctions with Supplier Qualification Screening
Operations Research
Independence of Capacity Ordering and Financial Subsidies to Risky Suppliers
Manufacturing & Service Operations Management
Optimal Procurement Design in the Presence of Supply Risk
Manufacturing & Service Operations Management
The Newsvendor Problem with Advertising Revenue
Manufacturing & Service Operations Management
Manufacturing & Service Operations Management
Manufacturing & Service Operations Management
Supply-Side Story: Risks, Guarantees, Competition, and Information Asymmetry
Management Science
Managing Disruption Risk: The Interplay Between Operations and Insurance
Management Science
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We study a manufacturer that faces a supplier privileged with private information about supply disruptions. We investigate how risk-management strategies of the manufacturer change and examine whether risk-management tools are more or less valuable in the presence of such asymmetric information. We model a supply chain with one manufacturer and one supplier, in which the supplier's reliability is either high or low and is the supplier's private information. On disruption, the supplier chooses to either pay a penalty to the manufacturer for the shortfall or use backup production to fill the manufacturer's order. Using mechanism design theory, we derive the optimal contract menu offered by the manufacturer. We find that information asymmetry may cause the less reliable supplier type to stop using backup production while the more reliable supplier type continues to use it. Additionally, the manufacturer may stop ordering from the less reliable supplier type altogether. The value of supplier backup production for the manufacturer is not necessarily larger under symmetric information; for the more reliable supplier type, it could be negative. The manufacturer is willing to pay the most for information when supplier backup production is moderately expensive. The value of information may increase as supplier types become uniformly more reliable. Thus, higher reliability need not be a substitute for better information.