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Contracting Under Asymmetric Holding Cost Information in a Serial Supply Chain with a Nearly Profit Maximizing Buyer

In: Operations Research Proceedings 2012

Author

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  • Guido Voigt

    (Otto-von-Guericke University Magdeburg)

Abstract

Screening contracts (or non-linear "menu of contracts") are frequently used for aligning the incentives in supply chains with private information. In this context, it is assumed that all supply chain parties are strictly (expected) profit maximizing and, therefore, sensible to even arbitrarily small pay-off differences between contract alternatives. However, previous behavioral work on contracting under asymmetric information in supply chains shows that agents (buyers) are not always strictly profit maximizing. The contribution provides researchers and managers an approach on how to account for such an insensitivity to arbitrarily small pay-off differences. The results highlight that supply chain performance losses can be substantially reduced under the behavioral robust contract.

Suggested Citation

  • Guido Voigt, 2014. "Contracting Under Asymmetric Holding Cost Information in a Serial Supply Chain with a Nearly Profit Maximizing Buyer," Operations Research Proceedings, in: Stefan Helber & Michael Breitner & Daniel Rösch & Cornelia Schön & Johann-Matthias Graf von der Schu (ed.), Operations Research Proceedings 2012, edition 127, pages 527-532, Springer.
    • Handle: RePEc:spr:oprchp:978-3-319-00795-3_79
    DOI: 10.1007/978-3-319-00795-3_79
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