A Study On The Coordinating Contracts For Supply Chains Under Asymmetric Information

As the market competition changes step by step from single enterprise competition to SC (supply chain) competition, a lot of enterprises use SCM (SC management) to reduce cost and enhance competition power. The SC coordination is essential to SCM. But Asymmetric information is ubiquitous because of the technology limit or/and the individual benefit, which result in more complexity of SC coordination. So this paper analyzes the coordination of SC under three typical asymmetric information model, and points out the coordination contracts based on the option contract.Generally speaking, the retailer not only acts passively as a sales clerk, but also positively carries on the product promotion to increase the market demand, to increase the sale and to improve the own profit. But the manufacture is difficult to verify the retailer's promotional level. The problem of"double marginalization"will bring the retailer to select the lower promotion level and decrease the inventory, which lowers the SC efficiency. In order to solve the above problem, this paper builds a"moral hazard"model with the retailer's promotion to analyses why the wholesale price contract is not enough to efficiently coordinate the SC. And then this paper analyses the effect of option contract on SC coordination, and points out the efficient contract to coordinate the SC based on the option contract.In real SC, the retailer often changes the investment of promotion with the demand instead of investing all funds in beginning. Therefore this paper extends the above moral hazard with hidden action model to analyses the SC coordination under double moral hazard consist of hidden action and hidden information. This paper explains the reason of insufficiency with the wholesale price contract, and analyses the incentive conflicts and"contract-induced"moral hazard with option contract. To remedy this problem, this paper points out the contract based on the option and puts forward the solution of the contract parameters.With the opening and the economic development of the China, more and more Chinese enterprises start to compete in international market. But in general, the Chinese manufactures know less the market information than the local retailers. So how to screen the retailer's private information is the important for SCM (SC management). To solve the above problem, this paper builds a screening model to analyze the reason of reduction of sufficiency with asymmetric information and points out the nonlinear cost-sharing contract based on option to coordinate the SC.The result of this paper will help the manufactures to coordinate the SC. And this paper proves the importance of option contract in SC coordination, which extends the other selection of SC coordination.