Bargaining for cooperative economic ordering
Decision Support Systems
A modeling methodology for supply chain synthesis and disruption analysis
International Journal of Knowledge-based and Intelligent Engineering Systems - Integrated and hybrid intelligent systems in product design and development
Simple Relational Contracts to Motivate Capacity Investment: Price Only vs. Price and Quantity
Manufacturing & Service Operations Management
Procuring Fast Delivery: Sole Sourcing with Information Asymmetry
Management Science
Sale Timing in a Supply Chain: When to Sell to the Retailer
Manufacturing & Service Operations Management
Supply Disruptions, Asymmetric Information, and a Backup Production Option
Management Science
Expert Systems with Applications: An International Journal
Expert Systems with Applications: An International Journal
Contracting for Collaborative Services
Management Science
Procurement Mechanism Design in a Two-Echelon Inventory System with Price-Sensitive Demand
Manufacturing & Service Operations Management
Asymmetric Information and Economies of Scale in Service Contracting
Manufacturing & Service Operations Management
Manufacturing & Service Operations Management
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The two critical factors distinguishing inventory management in a multifirm supply-chain context from the more traditional centrally planned perspective areincentive conflicts andinformation asymmetries. We study the well-known order quantity/reorder point ( Q, r) model in a two-player context, using a framework inspired by observations during a case study. We show how traditional allocations of decision rights to supplier and buyer lead to inefficient outcomes, and we use principal-agent models to study the effects of information asymmetries about setup cost and backorder cost, respectively.We analyze two "opposite" models of contracting on inventory policies. First, we derive the buyer's optimal menu of contracts when the supplier has private information about setup cost, and we show how consignment stock can help reduce the impact of this information asymmetry. Next, we study consignment and assume the supplier cannot observe the buyer's backorder cost. We derive the supplier's optimal menu of contracts on consigned stock level and show that in this case, the supplier effectively has toovercompensate the buyer for the cost of each stockout.Our theoretical analysis and the case study suggest that consignment stock helps reducecycle stock by providing the supplier with an additional incentive to decrease batch size, but simultaneously gives the buyer an incentive to increasesafety stock by exaggerating backorder costs. This framework immediately points to practical recommendations on how supply-chain incentives should be realigned to overcome existing information asymmetries.