Pricing Indirect Behavioral Effects in a Supply Chain: From the Perspective of “Contracts as Reference Point”

Isik Bicer ()
Additional contact information
Isik Bicer: University of Lausanne

A chapter in Operations Research Proceedings 2012, 2014, pp 549-554 from Springer

Abstract: Abstract We consider a supply chain with one supplier and one retailer in which the supplier produces a single product demanded by the retailer. The two parties in the supply chain negotiate on a contract for the delivery of the product, and the contract specifies the number of firm commitments and options. The retailer who aims to increase his own profit without any concern about the supplier’s profitability increases the uncertainty on the supplier’s side by changing the cost structure of the contract. In this research, we integrate "contracts as reference points" theory (Hart and Moore Ouarterly J Econ 123:1–48, 2008) into quantity flexible contracts to price the indirect effects of retailer’s behavior on his own payoff function. Under voluntary compliance, we show that there is a trade-off for the retailer between decreasing the option cost and increasing the indirect behavioral cost that is imposed by the supplier when the uncertainty on her payoff function is increased by the retailer. Apart, we also show that the indirect cost of the retailer increases as the supplier becomes more critical to the retailer.

Keywords: Quantity Flexibility Contract; Voluntary Compliance; Cost Option; Psychic Loss; Consumer Performance (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-319-00795-3_82

Ordering information: This item can be ordered from
http://www.springer.com/9783319007953

DOI: 10.1007/978-3-319-00795-3_82

Access Statistics for this chapter

More chapters in Operations Research Proceedings from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().