Equilibria and dynamics of supply chain network competition with information asymmetry in quality and minimum quality standards

Anna Nagurney () and Dong Li

Computational Management Science, 2014, vol. 11, issue 3, 285-315

Abstract: In this paper, we construct a supply chain network model with information asymmetry in product quality. The competing, profit-maximizing firms with, possibly, multiple manufacturing plants, which may be located on-shore or off-shore, are aware of the quality of the product that they produce but consumers, at the demand markets, only know the average quality. Such a framework is relevant to products ranging from certain foods to pharmaceuticals. We propose both an equilibrium model and its dynamic counterpart and demonstrate how minimum quality standards can be incorporated. Qualitative results as well as an algorithm are presented, along with convergence results. The numerical examples, accompanied by sensitivity analysis, reveal interesting results and insights for firms, consumers, as well as policy-makers, who impose the minimum quality standards. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Supply chains; Game theory; Quality competition; Information asymmetry; Networks; Variational inequalities; Projected dynamical systems; Minimum quality standards (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s10287-014-0216-8

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