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Incentive provision for demand information acquisition in a dual-channel supply chain

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  • Huang, Song
  • Guan, Xu
  • Xiao, Binqing

Abstract

This paper studies an endogenous adverse selection model in a dual-channel supply chain setting, in which the manufacturer can offer a menu of contracts to induce the retailer to costly acquire private demand information. We derive the manufacturer’s optimal incentive provision decision and show that although the increase of acquisition cost results in higher distortion effect on the retailer’s selling quantity, such a distortion effect can be alleviated in a dual-channel setting. The manufacturer’s incentive provision exhibits a threshold policy. When demand variation is high and information acquisition cost is low, acquiring demand information does not necessarily benefit the retailer.

Suggested Citation

  • Huang, Song & Guan, Xu & Xiao, Binqing, 2018. "Incentive provision for demand information acquisition in a dual-channel supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 116(C), pages 42-58.
    • Handle: RePEc:eee:transe:v:116:y:2018:i:c:p:42-58
    DOI: 10.1016/j.tre.2018.05.012
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