| A lot of earlier literature has found that asymmetric information is amajor source of low efficiency in supply chains. The strategic use of private informationcan result in inefficiency of resource allocation even if sophisticated menus of contracts are adopted.In the light of this, screening asymmetric information is particularly important.It needsinformation communicationin supply chain management.In order to ensure sufficient product supply, retailers have an incentive to lie about his type in a way of no cost and no constraints, known as "cheap talk".On the basis of standard game theory, both parties don’t cooperate and the equilibrium doesn’t provide any useful information—the retailertalks nonsenseregardless of his true type and the supplierignores the retailer’s ‘nonsense’ and make capacity decisions independently.Later on, scholarsfoundin some experiments thatthere will be cooperation between both parties in the absence of reputation-building mechanisms and complex contract designs.They have demonstrated that the potential reason for this is trust and trustworthiness. Currentliteratureon information exchange gives tacit consent to either supply chain members completely trusting each other or just not believing each other at all.We consider a situation between the two, assuming that a certainproportion of people is worthy of trust(i.e. honest retailer) and the otherratio is not worthy of trust(i.e.strategicretailer).In short, anhonest retailer truthfully reports his type; a strategic retailer lies about his information that is, he can pretend to be an honest one to defraud supplier’s trust in maximizinghis own profit.Considering that there is a certain proportion of honest retailers, the supplierhas to adjust his belief onthe probability distribution of theretailer’s type(that is, the posterior distribution), and thendesign a series of separate contractsacccordingly.Theequilibria of thesignaling game are spilt into two categories: one is that the strategic retailer faced with high market demand reports the signalof low demandwith the probability of 1; the other is equal to the one with no signal transmission.This paper depicts the equilibria of the first category, takes the demand of normal distribution as an example to verify the properties of the equilibria and further draws some major conclusions as follows:(1) In signaling game, when his rival is an honest retailer, the supplier’s profit increases; otherwise, the supplier’s profit decreases;(2) In signaling game, expected profit of the supplier’s increases with the retailer’s trustworthiness;(3) The profit of an honest retailer decreases when faced with high market demand and remain unchanged when faced with low demand; the profit of a strategic retailer increases when he is faced with high market demand and reports fake information and remains unchanged when faced with low demand;(4) In signaling game, the supply chain efficiency increases with the retailer’s trustworthiness. |
