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Risk sharing in the supplier relations for the Taiwanese automotive industry

Author

Listed:
  • C-L Liu

    (Chang Gung University, Tao-Yuan, Taiwan)

  • S-L Chen

    (Asia University, Taichung, Taiwan)

Abstract

This study attempts to develop a supplier's risk sharing contract to gain an understanding of risk sharing for the automotive industry in Taiwan. The existing research has examined revenue-sharing contracts between retailers and manufacturers. However, the study of suppliers’ risk-sharing contracts between manufacturers and suppliers is neglected. This paper first employs a double moral hazard framework to obtain an optimal contract, and then uses the derived model to establish research hypotheses. The empirical analysis shows that manufacturers offer suppliers a type of supplier's risk sharing contract while maintaining long-term relationships with suppliers. The results also support the hypotheses that manufacturers absorb more risk when the suppliers are more uncertainty, more risk aversion and lower moral hazard, and suggest that manufacturers would be willing to absorb more risk as they deepen their involvement in the technological development of suppliers.

Suggested Citation

  • C-L Liu & S-L Chen, 2013. "Risk sharing in the supplier relations for the Taiwanese automotive industry," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 64(3), pages 365-371, March.
    • Handle: RePEc:pal:jorsoc:v:64:y:2013:i:3:p:365-371
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    Cited by:

    1. Sarah Parlane & Ying-Yi Tsai, 2017. "Optimal Management of Supply Disruptions when Contracting with Unreliable, Risk-averse, Suppliers," Working Papers 201714, School of Economics, University College Dublin.
    2. Sima M. Fortsch & Jeong Hoon Choi & Elena A. Khapalova, 2022. "Competition can help predict sales," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(2), pages 331-344, March.
    3. Mubarik, Muhammad Shujaat & Kazmi, Syed Hasnain Alam & Zaman, Syed Imran, 2021. "Application of gray DEMATEL-ANP in green-strategic sourcing," Technology in Society, Elsevier, vol. 64(C).
    4. Chunguang Bai & Joseph Sarkis, 2016. "Supplier development investment strategies: a game theoretic evaluation," Annals of Operations Research, Springer, vol. 240(2), pages 583-615, May.

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