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Author: Kazumi Hori
Publisher:
ISBN:
Category :
Languages : en
Pages : 14
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Book Description
Optimal contracts between a buyer and a seller who trade multiple goods under asymmetric information are considered. The seller makes sequences of unobservable investments, and then realizes the value of the goods. The investment level and value of goods are private information for the seller and the buyer respectively. In this situation, although the parties can write complete contracts, a hold-up problem exists. It is shown that each good is not traded sequentially in the second-best contract, but they are treated independently or as one bundled good. Dynamic contracts cannot solve the hold-up problem.
Author: Kazumi Hori
Publisher:
ISBN:
Category :
Languages : en
Pages : 14
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Book Description
Optimal contracts between a buyer and a seller who trade multiple goods under asymmetric information are considered. The seller makes sequences of unobservable investments, and then realizes the value of the goods. The investment level and value of goods are private information for the seller and the buyer respectively. In this situation, although the parties can write complete contracts, a hold-up problem exists. It is shown that each good is not traded sequentially in the second-best contract, but they are treated independently or as one bundled good. Dynamic contracts cannot solve the hold-up problem.
Author: Sridhar Tayur
Publisher: Springer Science & Business Media
ISBN: 1461549493
Category : Business & Economics
Languages : en
Pages : 851
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Book Description
Quantitative models and computer-based tools are essential for making decisions in today's business environment. These tools are of particular importance in the rapidly growing area of supply chain management. This volume is a unified effort to provide a systematic summary of the large variety of new issues being considered, the new set of models being developed, the new techniques for analysis, and the computational methods that have become available recently. The volume's objective is to provide a self-contained, sophisticated research summary - a snapshot at this point of time - in the area of Quantitative Models for Supply Chain Management. While there are some multi-disciplinary aspects of supply chain management not covered here, the Editors and their contributors have captured many important developments in this rapidly expanding field. The 26 chapters can be divided into six categories. Basic Concepts and Technical Material (Chapters 1-6). The chapters in this category focus on introducing basic concepts, providing mathematical background and validating algorithmic tools to solve operational problems in supply chains. Supply Contracts (Chapters 7-10). In this category, the primary focus is on design and evaluation of supply contracts between independent agents in the supply chain. Value of Information (Chapters 11-13). The chapters in this category explicitly model the effect of information on decision-making and on supply chain performance. Managing Product Variety (Chapters 16-19). The chapters in this category analyze the effects of product variety and the different strategies to manage it. International Operations (Chapters 20-22). The three chapters in this category provide an overview of research in the emerging area of International Operations. Conceptual Issues and New Challenges (Chapters 23-27). These chapters outline a variety of frameworks that can be explored and used in future research efforts. This volume can serve as a graduate text, as a reference for researchers and as a guide for further development of this field.
Author: Guido Vogt
Publisher: Springer Science & Business Media
ISBN: 3642201326
Category : Business & Economics
Languages : en
Pages : 208
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Book Description
Information sharing is frequently promoted as a mean to improve the supply chain performance. This work shows the results of behavioral experiments, in which the participants share private information in order to influence the contract terms in a Just-in-Time environment. It is shown that the impact of information sharing is ambiguous, and dependent on several factors, such as contract flexibility and complexity or the interacting behavioral types. The experimental results form the basis for a behavioral principal-agent model that gives valuable insights on how the interaction of trust, trustworthiness and the information sharing strategy impacts the supply chain performance.
Author: Aadhaar Chaturvedi
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We consider a multi-item buyer's make versus buy decision. The buyer sells two substitutable products with uncertain demand. Each product requires a different item, which the buyer procures from two separate suppliers (one for each item) who offer quantity-payment contracts under asymmetric information. The buyer can make one of the items but not both. We compare the buyer's expected profit between buying both the items and making one item (and buying the other), when it can make the item at the same cost as the supplier, as well as gain reactive production capability by making. We find that the buyer's profit when buying both items is higher than for making one item if product substitutability is above a threshold (but not extremely high). This is because the interaction between the suppliers' contracts increases the buyer's informational rents more when buying from both suppliers, as compared to one supplier, as product substitutability increases. On the contrary, in the complete information scenario (and under wholesale price contracts), we find that the buyer will never prefer to buy both the items as compared to making one item, as long as product substitutability is not extremely high. These are novel findings on how interlinked contracts under incomplete information and product substitutability can influence a buyer's make versus buy decision in a counter-intuitive manner. Managerially, these results imply that a multi-product buyer may prefer to keep buying from its supplier even when it can produce the item at the same cost as the supplier.
Author: Wenqiang Xiao
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
We consider a make-to-order supply chain where a retailer sells a product for a manufacturer. There is a single selling season, during which the retailer receives customer orders and then sends the orders to the manufacturer for fulfillment. The manufacturer privately exerts effort to install production capacity prior to the season. Further, the manufacturer has superior information about the product potential than the retailer. Our focus is on the retailer's optimal design of incentive contracts facing the combination of adverse selection (due to the manufacturer's superior information about the demand) and moral hazard (due to the manufacturer's private effort decision). A contract is efficient if it renders the retailer the first-best profit (i.e., the integrated system's maximum profit). It is often true that the first-best profit can not be achieved even in settings with pure adverse selection. Indeed, we show that contracting based on sales is inefficient and illustrate the causes of inefficiency by studying a menu of revenue sharing contracts. However, we propose two simple mechanisms and show both are efficient: in the first, contracting is based on demand; in the second, contracting is based on the conjunction of sales and the binary information of whether or not demand exceeds the capacity. The insight obtained from these two mechanisms could offer useful guidelines for efficient contract design in more general principal-agent settings with both adverse selection and moral hazard.
Author: Shiva S. Makki
Publisher:
ISBN:
Category : Adverse selection (Insurance)
Languages : en
Pages : 44
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Book Description
Author: Tat Y. Chan
Publisher:
ISBN:
Category :
Languages : en
Pages : 56
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Book Description
We investigate the economic determinants of contract structure and entry in an empirical setting with transfer contracts, which specify that manufacturers directly sell their products in retail stores while retailers collect the sales revenue and return a transfer to the manufacturers. Using a unique dataset describing the entry decisions of clothing manufacturers into a retail department store, we estimate a two-sided, asymmetric-information entry model. We then use this model to compare profit estimates under transfer contracts to counterfactual profit estimates obtained under common alternative contract formats. Results show that, when adverse selection is present, transfer contracts dominate other contract formats from the retailer's perspective; otherwise, the common alternative contract formats dominate.
Author: M. Çakanyıldırım
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
We analyze a supply chain consisting of a supplier and a retailer. The supplier's unit production cost, which characterizes his type, is only privately known to him. When trading with the retailer, the supplier demands a reservation profit that depends on his unit production cost. We model this problem as a game of adverse selection. In this model, the retailer offers a menu of contracts, each of which consists of two parameters: the ordering quantity and the supplier's share of the channel profit. We show that the optimal contract depends critically on a surrogate measure. This measure represents the size of the outside market that the supplier may serve if not trading with the retailer. An important implication from our analysis is that information asymmetry alone does not necessarily induce loss in channel efficiency. The optimal contract can coordinate the supply chain as long as the size of the outside market is comparable to the quantities required by the retailer. We further discuss the retailer's preference of the supplier's type under different market conditions, as well as evaluate the effects of the supplier's reservation profit, the retail price, and the demand uncertainty on the optimal contract.
Author: Guido Vogt
Publisher: Springer
ISBN: 9783642201318
Category : Business & Economics
Languages : en
Pages : 181
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Book Description
Information sharing is frequently promoted as a mean to improve the supply chain performance. This work shows the results of behavioral experiments, in which the participants share private information in order to influence the contract terms in a Just-in-Time environment. It is shown that the impact of information sharing is ambiguous, and dependent on several factors, such as contract flexibility and complexity or the interacting behavioral types. The experimental results form the basis for a behavioral principal-agent model that gives valuable insights on how the interaction of trust, trustworthiness and the information sharing strategy impacts the supply chain performance.
Author: Sugata Bag
Publisher: Springer
ISBN: 3319652680
Category : Law
Languages : en
Pages : 215
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Book Description
This book examines the main issues arising in economic analysis of contract law with special attention given to the incomplete contracts. It discusses both the main features of contract law as they relate to the problem of economic exchange, and how the relevant legal rules and the institutions can be analysed from an economic perspective. Evaluate the welfare impacts, analyses the effects and the desirability of different breach remedies and examines the optimal incentive structure of party-designed liquidated damages under the different dimensions of informational asymmetry. Overall the book aims to contribute to the legal debate over the adoption of the specific breach remedies when the breach victim’s expectation interest is difficult to assess, and to the debate over courts' reluctance to implement large penalties in the event of breach of contracts.
