Author(s): Zhuang Pin, Zhao Lindu
Pages: 74-80
Year: 2008 Issue:  1
Journal: TRANSACTIONS OF NANJING UNIVERSITY OF AERONAUTICS AND ASTRONAUTICS
Keyword:  supply chains; contracts; optimal control; asymmetric information;
Abstract: The challenge for supply chain management is to create appropriate supply chain contracts so as to optimize the system performance. To examine the role of asymmetric information in a two-echelon supply chain system and derive supply chain contracts to deal with existing asymmetric information, a two level supply chain model including one supplier and one retailer under the demand of price elasticity is developed. By using the principal-agent principle and the optimal control theory, three types of supply chain contract, i.e., a wholesale pricing contract, a two-parameter linear and a two-parameter nonlinear contracts are obtained. In these contracts, the supplier has asymmetric information about the retailer cost structure. Simulation results show that the two-parameter contracts are more effective strategies to achieve supply chain coordination.