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.
Notes
Recall that with linear constraints the Slater condition is not needed, c.f. [9].
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Acknowledgements
The revised paper benefited from the comments of five anonymous referees. Special thanks are due to Dr. Alper Şen for suggestions.
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Pınar, M.Ç. On explicit solutions of a two-echelon supply chain coordination game. Optim Lett 12, 661–673 (2018). https://doi.org/10.1007/s11590-018-1243-0
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DOI: https://doi.org/10.1007/s11590-018-1243-0