Supply chain coordination under discrete information asymmetries and quantity discounts

Dimitris Zissis, George Ioannou and Apostolos Burnetas

Omega, 2015, vol. 53, issue C, 21-29

Abstract: We consider a two node supply chain with a rational manufacturer–retailer pair, in which the retailer has private information that affects the nodes׳ reservation levels. Quantity discounts offered by the manufacturer is the mechanism we propose in order to achieve reduced costs for both supply chain nodes. We derive analytical expressions of the quantity discounts that minimize the manufacturer׳s costs, while enabling the establishment of the business. Furthermore, we show that perfect coordination is possible even under asymmetric information. Sensitivity analysis and numerical examples offer evidence of the robustness of the results and of the potential of the approach for applications to real-life business ventures.

Keywords: Supply chain management; Game theory; Quantity discount; Discrete asymmetric information; Reservation level (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (20)

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DOI: 10.1016/j.omega.2014.11.007

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