Procuring Fast Delivery: Sole Sourcing with Information Asymmetry
Management Science
Supply Disruptions, Asymmetric Information, and a Backup Production Option
Management Science
Quality Improvement Incentives and Product Recall Cost Sharing Contracts
Management Science
Contract design of quality control in supply chain based on hidden action
CCDC'09 Proceedings of the 21st annual international conference on Chinese control and decision conference
Computer Networks: The International Journal of Computer and Telecommunications Networking
Asymmetric Information and Economies of Scale in Service Contracting
Manufacturing & Service Operations Management
Manufacturing & Service Operations Management
A Supply Network's Optimal Information System and Material Flows
International Journal of Information Systems and Supply Chain Management
A fuzzy supply chain contract problem with pricing and warranty
Journal of Intelligent & Fuzzy Systems: Applications in Engineering and Technology
| Hi-index | 0.01 |
This paper investigates the contract design problem of a producer when he purchases parts from a supplier, and there is incomplete information regarding the quality of the parts. This is the first game-theoretic model of quality control that captures this informational asymmetry. We focus on two compensation schemes embedded in the contract, namely, price rebate (when inspection is done upon receipt of the parts) and warranty. We show that when a full-price rebate is not possible and the producer and the supplier have to share the damage costs, an optimal contract is such that the supplier compensates the producer by the same amount, regardless of his quality type. However, a supplier with low quality is more likely to be offered a contract with an inspection scheme, while a supplier with high quality is constrained with a warranty scheme. We also show that when the producer need not share the cost in exactly one of the compensation schemes, he may still offer the other compensation scheme to a supplier type depending on the relative costs involved, the maximum compensation cost acceptable by all supplier types, and his ex ante beliefs about the quality level of the supplier.