Setup Cost Reduction and Supply Chain Coordination in Case of Asymmetric Information
AbstractScreening contracts are a common approach to solve supply chain coordination problems under asymmetric information. Previous research in this area shows that asymmetric information leads to supply chain coordination deficits. We extend the standard framework of lotsizing decisions under asymmetric information by allowing investments in setup cost reduction. We find that asymmetric information leads to an overinvestment in setup cost reduction. Yet, the overall effect on supply chain performance is ambiguous. We show that these results holds for a wide variety of investment functions.
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Bibliographic InfoPaper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 08016.
Length: 41 pages
Date of creation: Jun 2008
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-13 (All new papers)
- NEP-BEC-2008-09-13 (Business Economics)
- NEP-CTA-2008-09-13 (Contract Theory & Applications)
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