Abstract:This research investigates how to design procurement mechanisms for assortment planning. We consider that a retailer buys directly from a manufacturer who possesses private information about the per-unit variable cost and per-variety setup cost. We first develop a screening model to assist the retailer in integrating assortment planning into supply chain contracting processes when only one manufacturer is available. We demonstrate that the screening mechanism is optimal among all feasible procurement strategie… Show more
“…Aydin and Hausman () find that slotting fees can induce the retailer to offer the supply‐chain‐optimal assortment. Li, Shao, and Sun () develop a multidimensional screening model in which manufacturers (i.e., potential suppliers to a retailer) have private information on costs and bid in a Vickrey auction for the opportunity to supply that retailer. Chu () concludes that screening with slotting allowances can yield higher total channel profits and higher social welfare.…”
Stage‐gate contracts are common in R&D projects, and outsourcing of R&D (from a principal to an agent) is becoming more prevalent. We explore how the principal can best formulate an outsourcing contract when the agent's effort is unobservable (moral hazard) and the agent has inside information (adverse selection) in a stage‐gate setting with two distinct stages. We find that the stage‐gate contract can help offset the information asymmetry and that the agent pays an upfront buy‐in.
“…Aydin and Hausman () find that slotting fees can induce the retailer to offer the supply‐chain‐optimal assortment. Li, Shao, and Sun () develop a multidimensional screening model in which manufacturers (i.e., potential suppliers to a retailer) have private information on costs and bid in a Vickrey auction for the opportunity to supply that retailer. Chu () concludes that screening with slotting allowances can yield higher total channel profits and higher social welfare.…”
Stage‐gate contracts are common in R&D projects, and outsourcing of R&D (from a principal to an agent) is becoming more prevalent. We explore how the principal can best formulate an outsourcing contract when the agent's effort is unobservable (moral hazard) and the agent has inside information (adverse selection) in a stage‐gate setting with two distinct stages. We find that the stage‐gate contract can help offset the information asymmetry and that the agent pays an upfront buy‐in.
“…Several researchers studied the supply chain contract design with asymmetric information as summarized in Table . First, most of the researchers considered asymmetric cost information in their supply chain contracting models (Corbett, Zhou, & Tang, ; Mukhopadhyay et al., ; Chaturvedi & Martínez‐de‐Albéniz, ; Özer and Raz, ; Çakanyıldırım, Feng, Gan, & Sethi, ; Fang, Ru, & Wang, ; Li, Shao, & Sun, ; Wagner, ). Comparatively, the supply chain contract design with asymmetric demand information has attracted less attention (Cachon, ; Chen, ; Kalkanci & Erhun, ; Lee & Yang, ).…”
Section: Literature Reviewmentioning
confidence: 99%
“…Second, with respect to the characteristics of asymmetric information, there are more researchers considering the binary opposite asymmetric information for both suppliers and manufacturers (Cachon, ; Özer & Raz, ; Çakanyıldırım et al., ; Lee & Yang, ; Fang et al., ; Li et al., ; Wagner, ) than the continuous asymmetric information (Corbett et al., ; Chen, ; Mukhopadhyay et al., ; Chaturvedi Martínez‐de‐Albéniz, ; Kalkanci & Erhun, ).…”
Section: Literature Reviewmentioning
confidence: 99%
“…Third, with respect to the number of players involved in the supply chain contracting model, there are two groups of studies. The majority of the studies focuses on one buyer/manufacturer–two/multiple suppliers (Chen, ; Chaturvedi & Martínez‐de‐Albéniz, ; Özer & Raz, ; Kalkanci & Erhun, ; Lee & Yang, ; Fang et al., ; Li et al., ). The other group of studies focuses on one buyer/manufacturer–one supplier (Cachon, ; Mukhopadhyay et al., ; Çakanyıldırım et al., ; Wagner, ).…”
We aim to design an appropriate sourcing mechanism with information asymmetry in a supply chain with one manufacturer and multiple suppliers subject to an emissions trading scheme. The manufacturer purchases raw materials from suppliers, who hold private information regarding the green degree-that is, the unit emission rates-of their raw materials. An appropriate strategy must be adopted by the manufacturer for the contract design, including a series of payments and the order quantities; the suppliers are subsequently invited to bid for the contracts. The basic model is formulated to assist the manufacturer in designing a reasonable contract for a single supplier. The characteristics of the optimal order quantity and payoff functions of both the manufacturer and supplier are analyzed. A competitive procurement scenario with multiple suppliers is also discussed. With respect to the diversity of auctions, three different auction types are analyzed, including a green degree auction, a price auction with emissions targets, and a performance-based auction. In addition, an efficient emissions trading policy is established to guide manufacturers regarding how to balance their emission allowances based † Corresponding author.
122Contract Design with Information Asymmetry on the optimal order quantities. Our approach provides an effective decision support system for both the manufacturer and suppliers. other journals. His research interests are in the areas of risk management in supply chains, strategic sourcing and buyer-supplier relationships, technology management, and performance evaluation. He serves as the Department Editor for IEEE Transactions in Engineering Management and Senior Editor for Decision Sciences Journal. He has more than 6,500 citations of his work and an h-index of 39.
“…The celebrated newsvendor model has well demonstrated that when the buyer faces uncertain demand, the optimal order quantity should depend on the purchasing price. To improve procurement efficacy, reverse auctions with order quantities dependent on bids receive increasing attention (e.g., Chen, 2007;Duenyas, Hu, & Beil, 2013;Li, Shao, & Sun, 2015). As a natural basis of supplier competition and a key determinant in the buyer's quantity decision, wholesale price bidding is a simple and commonly used instrument in procurement auctions (e.g., Li & Scheller-Wolf, 2011;Budde & Minner, 2014).…”
Wholesale price bids commonly occur in procurement auctions where dual sourcing is usually employed to mitigate supply risks. When at most two winners are required, unreliable wholesale price bidders face the unique trade‐off between unit margin and quantity allocation that depends on both winners' bids and the reliabilities. Motivated by above facts and considerations, we investigate several auction formats accommodating wholesale price bids for dual sourcing under newsvendor market, with unreliable suppliers possessing private costs. Generalized first‐price auction (GFA) is designed under known cost distribution, while generalized English auction (GEA) and optimal auction with learning (OAL) are examined under unknown distribution. Through a preannounced allocation rule to curb the bidding behavior, both GFA and OAL balance information rent and quantity allocation and generate various diversification degrees. Information asymmetry under GFA depresses the quantity proportion for high‐cost winner, because he charges higher unit information rent than low‐cost winner does. In contrast, two winners in GEA collude at the same price and thus split the order quantity evenly. The full diversification possibly enables GEA to generate higher service level than GFA under high supply risk, although the expected output quantity of GEA is always lower. Regarding the practical requirement for auction format choice, when the costs of implementation and distribution acquisition are not negligible, the previous analysis suggests that the favorable format is driven from GFA or OAL to GEA, as supply risk or the number of bidders increases, or as retail price exceeds a threshold. We also extend to multisourcing cases and examine the impacts of salvage and lost sale on auction format choice.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.