Incentive Contract Design Considering Retailer’s Forecast Cost

With the development of economic globalization and internet,the links between countries around the world are getting closer.More and more foreign companies value the Chinese market.Because China’s open second-child policy,there will be business opportunities for children’s apparel,so some enterprises have opened up children’s and family-friendly series.By selling children’s wear to attract new dad and mom into the store,the sales of adult clothing will be further promoted.But the new series has brought new challenges to the company.This is an area that they have not touched.It is very important for them to obtain accurate demand information.It is difficult for enterprises to obtain this information,while downstream retailers are closer to customers,but they need to pay a certain forecast cost to obtain and analyze data to obtain demand information.In the classic information screening model,it is usually assumed that the retailer knows the market demand information by nature,and the information structure is given exogenously.In the research of this paper,we further think about the endogenous information structure.That is,whether the retailer spends this part of the information is determined by the manufacturer.Both upstream and downstream retailers can observe this cost,and the company can maximize its own interests by redesigning the incentive contract to achieve incentives for retailers to predict or not.This is the main content of this paper.Firstly,as a basic model,the optimal wholesale-price contract and the optimal forecasting strategy for maximizing the benefits of the overall supply chain system under centralized decision-making are obtained.At this model,the supply chain as the whole system does not have the behavior of stimulating the retailer,but He can decide to predict or not.Secondly,the game process and optimal decision-making problem of all supply chain enterprises are analyzed by inverse induction.Under decentralized decision-making,we consider the self-interested strategic behavior of each member of the supply chain.Based on the principal-agent mechanism theory,firstly construct a model that does not encourage retailers to predict,and obtain the optimal wholesale-price contract that maximizes the benefits of the manufacturer.It is found that the retailer can obtain strict and positive information rent.Then construct a model that motivates the retailer to make predictions,and also solve the optimal wholesale-price contract that maximizes the benefits of the manufacturer.We can further obtain the change of the benefits of each member of the supply chain with the forcast cost through numerical analysis.Finally,through comparative analysis,under the decentralized decision-making,in two cases,we can get the manufacturer’s optimal decision changes,and further obtain the manufacturer’s and the system’s optimal incentive strategy.We also can carry out related parameter analysis.This work shows that under the centralized decision-making,the accuracy of the overall demand information of the system brought by the forecast will improve the efficiency of the supply chain and increase the revenue of the system.However,under decentralized decision-making,it is not the incentive to retailers to obtain demand information,it will certainly benefit manufacturers,depending on the forecasted cost.When the forecasting cost is high,the retailer predicts that it will cost a lot of money.It is more difficult for the manufacturer to motivate him to predict,and he has to pay him more information rent.So when the forecasted cost is above a certain value,the manufacturer chooses not to motivate the retailer to predict the benefits gained.Conversely,when the forecasting cost is small,it is easy to motivate the retailer to predict,and the manufacturer can achieve it without paying too much information rent.Therefore,when the forecasted cost is lower than a certain value,the manufacturer chooses to motivate the retailer to predict,then the benefits gained are even greater.