The Studies Of Moral Hazard And Contract Design In Supply Chain

The supply chain describes a variety of objective existence. It covers the following steps: purchasing, raw material, producing half-finished and finished goods and finally sending products to consumers through sales network, all of which are carried out around core enterprises. By taking control of information flow, logistics flow and capital flow, it connects supplier, maker, distributor, retailer and finally end user into a whole network system or mode. It includes all associated branch enterprises. Beginning with raw material supply, it experiences the processes of making, processing, assembling, distributing etc. among different enterprises in the chain, and finally ends at end users.The supply chain composed of maker and distributor is a commercial mode of importance, however, when confronting such kind of chain, a maker will promote the sales by investing both money and time on advertisements while a distributor would prefer to achieve the same aim through promotion campaign. The essay has established the supply chain mode composed of maker and distributor, in which problems such as gambling relations, contract design, moral hazard and coordination are discussed. At the very first, we suppose that result of Nash is balanced, which solves the favorable design of contract problem in the supply chain. Next, through equation of payment function, the essay disposes the moral hazard between maker and distributor, thus proving the phenomenon of Prisoner Hesitancy existing inside the supply chain. Finally, it analyses how distribution contract affects the decisions of both maker and distributor.The theoretical sense of this thesis lies in that it riches theory systems such as moral hazard and contract design in the supply chain, explores some thoughts and methods to solve such problems stated above and lays base for further study as well. Meanwhile, in practice, the content and views discussed in the thesis can be used to direct management that is scientific and effective in the supply chain, so that the weaknesses can be avoided while the strengths can be exploited and disadvantages can be overcome as well, thus leading supply chain to greater use in its superiority.