Abstract
In a manufacturerretailer system with private retail cost information, we find that a set of incentive-compatible contracts consisting of wholesale and buyback prices can coordinate the channel for any retail cost. We then design two wholesale-buyback contracts by imposing a cutoff point on the retail cost. The first contract maximizes the manufacturers expected profit while ensuring the channel is coordinated. The second contract assumes the same contractual structure without considering the effect on the channel. Both contracts are exactly solved. We find from numerical study that the manufacturer in the first contract can perform closely to the second one in many cases, and cases exist where both the manufacturer and the channel can do better in the first contract versus the second one.
Original language | English |
---|---|
Pages (from-to) | 125-135 |
Number of pages | 11 |
Journal | International Journal of Production Economics |
Volume | 135 |
Issue number | 1 |
DOIs | |
Publication status | Published - Jan 2012 |
Externally published | Yes |
Keywords
- Buyback contract
- Information asymmetry
- Mechanism design
- Supply chain coordination