Supplier participation in digital transformation of a two-echelon supply chain: Monetary and symbolic incentives

Weihua Liu, Shuang Wei, Kevin W. Li and Shangsong Long

Transportation Research Part E: Logistics and Transportation Review, 2022, vol. 161, issue C

Abstract: By employing four game models, this paper examines the impact of both monetary and symbolic incentives on supplier participation in digital transformation of a two-echelon supply chain. We find that in the presence of monetary incentives, the supplier may exhibit free riding behavior when the buyer’s cost-sharing is sufficiently high, thereby leaving the buyer with no incentive to motivate the supplier. In contrast, a hybrid contract combining monetary with symbolic incentives enhances supplier participation. As the hybrid incentive is not always effective, we propose an improved hybrid contract with a reward-punishment mechanism to better motivate the supplier. Analytical results reveal that both members enjoy higher profitability when the buyer’s reward and punishment scheme is set within a reasonable range.

Keywords: Monetary incentives; Symbolic incentives; Supplier participation; Digital transformation (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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DOI: 10.1016/j.tre.2022.102688

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