Bayes information updating and multiperiod supply chain screening

Jianheng Zhou and Yao Luo

International Journal of Production Economics, 2023, vol. 256, issue C

Abstract: Regarding the cooperation of supply chain members under newsvendor demand uncertainty and asymmetric information, the classical single-period screening model is extended to multiple periods. According to this, the supplier's recursive multiperiod discounted profit based on bayes information updating is modeled, and the optimal rhythm of private market demand information disclosure is analyzed to study a process of gradual information disclosure. Finally, the effects of information updating on the product quantity, information rent and supplier's profit are investigated. We find that the multiperiod incentive mechanism under limited commitment has an intertemporal effect compared with the incentive mechanism under symmetric information and full commitment because of the retailer's dishonest reporting. The supplier always controls the disclosure rhythm strategically, its initial belief about a high-type retailer determines the cooperation period, and the higher the probability of a high-type retailer, the longer the cooperation. Although the product quantity of a low-type retailer is improved by reducing the magnitude of asymmetric information, which increases the “low allocation effect”, the supplier is profitable by using updated information, which is conditioned on the compound effects of the increased “rent effect”, “mismatch effect” and discount factor.

Keywords: Supply chain management; Demand uncertainty; Screening model; Multiperiod cooperation; Bayes information updating (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:256:y:2023:i:c:s0925527322003322

DOI: 10.1016/j.ijpe.2022.108750

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