Dynamic joint investments in supply chains under information asymmetry
Supply chain management involves the selection, coordination and motivation of independently operated suppliers. However the central planner's perspective in operations management translates poorly to vertically separated chains, where suppliers may have rational myopic reasons to object to full in- formation sharing and centralized decision rights. Particular problems occur when a downstream coordinator demands relation-specific investments (equipment, cost improvements in processes, adaptation of components to downstream processes, allocation of future capacity etc) from upstream suppliers without being able to commit to long-term contracts. In practice and theory, this leads of- ten to a phenomenon of either underinvestment in the chain or costly vertical integration to solve the commitment problem. A two-stage supply chain under stochastic demand and information asymmetry is modelled. A repeated investment-production game with coordinator commitment in supplier's investment addresses the information sharing and asset- specific investment problem. We provide a mitigation of the hold-up problem on the investment cost observed by the supplier and an instrument for truthful revelation of private information by using an investment sharing device. We show that there is an interior solution for the investment sharing parameter and discuss some extensions to the work.
|Date of creation:||01 Dec 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Smirnov, V. & Wait, A., 2001.
"Hold-up and Sequential Specific Investments,"
Department of Economics - Working Papers Series
807, The University of Melbourne.
- Patrick Gonz�lez, 2004.
"Investment and Screening Under Asymmetric Endogenous Information,"
RAND Journal of Economics,
The RAND Corporation, vol. 35(3), pages 502-519, Autumn.
- Gonzalez, Patrick, 2002. "Investment and Screening under Asymmetric Endogenous Information," Cahiers de recherche 0201, GREEN.
- Gonz�lez, Patrick, 2002. "Investment and Screening under Asymmetric Endogenous Information," Cahiers de recherche 0204, Université Laval - Département d'économique.
- Winfried Pohlmeier & Luc Bauwens & David Veredas, 2007. "High frequency financial econometrics. Recent developments," ULB Institutional Repository 2013/136223, ULB -- Universite Libre de Bruxelles.
- Agrell, P.J.Per J. & Lindroth, Robert & Norrman, Andreas, 2004. "Risk, information and incentives in telecom supply chains," International Journal of Production Economics, Elsevier, vol. 90(1), pages 1-16, July.
- Gonzalez, P., 1999.
"Specific Investment, Absence of Commitment and Observability,"
99-03, Laval - Recherche en Energie.
- Patrick González, 1999. "Specific Investment, Absence of Commitment and Observability," CIRANO Working Papers 99s-06, CIRANO.
- Gonz�lez, Patrick, 1999. "Specific Investment, Absence of Commitment and Observability," Cahiers de recherche 9902, Université Laval - Département d'économique.
- Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001.
"An Introduction to the Economics of Information: Incentives and Contracts,"
Oxford University Press,
edition 2, number 9780199243273.
- Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001. "An Introduction to the Economics of Information: Incentives and Contracts," OUP Catalogue, Oxford University Press, edition 2, number 9780199243259.
- Smirnov, Vladimir & Wait, Andrew, 2004.
"Timing of investments, holdup and total welfare,"
International Journal of Industrial Organization,
Elsevier, vol. 22(3), pages 413-425, March.
- Pitchford, Rohan & Snyder, Christopher M., 2004. "A solution to the hold-up problem involving gradual investment," Journal of Economic Theory, Elsevier, vol. 114(1), pages 88-103, January.
- Kultti, Klaus & Takalo, Tuomas, 2002. " Hold-Ups and Asymmetric Information in a Technology Transfer: The Micronas Case," The Journal of Technology Transfer, Springer, vol. 27(3), pages 233-43, June.
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2010085. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)
If references are entirely missing, you can add them using this form.