Purchase Contracts Design Under Asymmetric Supply Reliability Information

Because the supply chain members make decisions focusing on their own profit,it is common that some of them hold personal information and result in supply chain dis-coordination.Note that,when a buyer make contract,she has to take the supply risk into account,but the supplier is closer to the origin of supply rick and also may partially control the supply risk in some sense.Motivated by those problems in practice,we are aiming at studying when the supplier hold personal information about supply risk in some sense,how should the buyer make decisions of purchase contract.According to the features of supply risk,we describe the unreliability of the supplier by a exogenous risk rate that is published and a endogenous productivity,where the exogenous supply risk is cause by the uncertainty from outside which can be observed by all supply chain members and become common knowledge,while the endogenous supply risk is cause by the uncertainty from the supplier herself which is known only for the supplier but unknown for the buyer.We analyze the widely used contract type of prepayment and found the optimal contract parameters for the buyer,the optimal production decision of the supplier and their optimal profit under symmetry and asymmetric information environment.We find that under symmetric information environment,the prepayment contract can achieve supply chain coordination but not always under asymmetric information environment but can only achieve it when the supplier is with higher productivity.More specifically,the buyer would make a lower ordering quantity to the lower-productivity supplier and make a higher wholesale price to the higher-productivity supplier compared to the case with symmetric information to figure the true productivity of the supplier.So,we suggest lower-productivity supplier not to hold personal information and suggest the buyer invest more in their information management when the loss caused by the asymmetric information is too high.We also check these results for some other wide-used contracts and find that they are robust for risk-sharing contract and contrasts with partially paid by ordering quantity and partially paid by delivery.Furthermore,we find that when the adjustment of wholesale price is limited,prepayment contract has advantage than risk-sharing contract for the buyer.