The ability of Nash's theory of cooperative games to predict the outcomes of
Management Science
A cooperative game theory model of quantity discounts
Management Science
The structure of periodic review policies in the presence of random yield
Operations Research
Bargaining theory with applications
Bargaining theory with applications
Contracting with uncertain level of trust
Proceedings of the 1st ACM conference on Electronic commerce
Supply Disruptions, Asymmetric Information, and a Backup Production Option
Management Science
Management Science
Dynamic Pricing of Limited Inventories When Customers Negotiate
Operations Research
Manufacturing & Service Operations Management
Strategic alliance via co-opetition: Supply chain partnership with a competitor
Decision Support Systems
Supply-Side Story: Risks, Guarantees, Competition, and Information Asymmetry
Management Science
A new two-party bargaining mechanism
Journal of Combinatorial Optimization
Games with ambiguous payoffs and played by ambiguity and regret minimising players
AI'12 Proceedings of the 25th Australasian joint conference on Advances in Artificial Intelligence
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We consider the case of a first-time interaction between a buyer and a supplier who is unreliable in delivery. The supplier declares her estimate of the ability to meet the order obligations, but the buyer may have a different estimate, which may be higher or lower than the suppliers estimate. We derive the Nash bargaining solution and discuss the role of using a down-payment or nondelivery penalty in the contract. For the case of buyer overtrust, the down-payment contract maximizes channel profits when the suppliers estimate is public information. If the suppliers estimate is private information, a nonsymmetric contract is shown to be efficient and incentive compatible. For the case of buyer undertrust, the contract structure is quite different as both players choose not to include down-payments in the contract. When delivery estimates are public information, a nondelivery penalty contract is able to maximize channel profits if the buyer uses the suppliers estimate in making the ordering decision. If estimates are private information, channel profits are maximized only if the true estimates of both players are not far part. We also discuss the effect of different risk profiles on the nature of the bargaining solution. In three extensions of the model, we consider the following variants of the basic problem. First, we analyze the effect of early versus late negotiation on the bargaining solution. Then, we study the case of endogenous supply reliability, and finally, for the case of repeated interactions, we discuss the impact of updating delivery estimates on the order quantity and negotiated prices of future orders.