Study Of Two Supply Chain Contracts And Their Properties

In this dissertation, we propose two new contracts in different supply chainsituations and study their properties.First, we consider a classic two-stage supply chain, which is consisting of amanufacturer and a newsvendor retailer. Both supply chain members are risk neutral.In such a supply, we introduce a composite (CP) contract by organically combiningtwo component contracts: a buy back (BB) contract and a quantity flexibility (QF)contract. The CP contract is shown to have advantages over both component contractsin terms of supply chain coordination, profit allocation, and risk allocation. Inparticular, we obtain the following results:(a) as long as one of the componentcontracts is able to coordinate the supply chain, so is the CP contract. Moreover,when contract parameters are constrained, we find situations where the CP contractcoordinates the supply chain when neither component contract does.(b) Whencontract parameters are constrained, the CP contract is more flexible in terms of profitallocation among supply chain members than the component contracts.(c) The CPcontract is more flexible in terms of risk allocation than the component contracts.Second, we consider a supply chain consisting of a risk neutral manufacturer anda loss averse retailer. The retailer's degree of loss aversion is asymmetric informationto the manufacturer and the retailer. Under such a supply chain, we find thetraditional contracts (wholesale price, buy back, quantity flexibility, revenue sharing)have some limitations. So we propose a nonlinear profit sharing (NPS) scheme bymechanism design theory and show that the proposed NPS scheme has advantagesover the traditional contracts:(a) While the traditional contracts cannot prevent theretailer from exaggerating its degree of loss aversion, the NPS scheme is capable ofensuring the retailer to share it truthfully;(b) The traditional contracts cannot lead tosystemwide optimal profit of the whole supply chain, but the NPS scheme can makethe total supply chain profit approach to this systemwide optimum as the lower boundof the wholesale price decreases to0. In addition, we investigate the influence of information asymmetry on the profits (or utility) of the whole supply chain and itsmembers. It is shown that, under the NPS scheme, the information asymmetry lowersthe retailer's order quantity, decreases the manufacturer's profit and deterioratessupply chain performance, while it increases the retailer's utility. Interestingly, underthe wholesale price contract, we find that information asymmetry may benefit thewhole supply chain. Finally, we do numerical analysis to study the manufacturer'sincentive to adopt the NPS scheme.The major contributions of this dissertation are:(a) We propose a new compositecontract based on a buy back contract and a quantity flexibility contract, and show theadvantages of the proposed composite contract over buy back and quantity flexibilitycontracts;(b) We study a supply chain containing a loss averse member, and assumethat the degree of loss averse is asymmetric information to supply chain members,while all the existing literature on loss aversion assumes it to be symmetricinformation;(c) We propose a nonlinear profit sharing scheme by mechanism theoryand investigate its advantages and disadvantages over the traditional contracts(wholesale price, buy back, quantity flexibility, revenue sharing).