We study the pricing problem between two firms when the manufacturer's willingness to pay (wtp) for the supplier's good is not known by the latter. We demonstrate that it is in the interest of the manufacturer to hide this information from the supplier. The precision of the information available to the supplier modifies the rent distribution. The risk of opportunistic behaviour entails a loss of efficiency in the supply chain. The model is extended to the case of a supplier submitting offers to several manufacturers. Some managerial insight through a numerical illustration is provided.

Keywords: supply chain management, information asymmetry, bayesian belief, mechanism design, log-concave distributions

@article{RO_2014__48_4_477_0, author = {Brusset, Xavier}, title = {Estimating the supply chain efficiency loss when the seller has to estimate the buyer's willingness to pay}, journal = {RAIRO - Operations Research - Recherche Op\'erationnelle}, pages = {477--496}, publisher = {EDP-Sciences}, volume = {48}, number = {4}, year = {2014}, doi = {10.1051/ro/2014018}, mrnumber = {3264389}, zbl = {1299.91043}, language = {en}, url = {http://archive.numdam.org/articles/10.1051/ro/2014018/} }

TY - JOUR AU - Brusset, Xavier TI - Estimating the supply chain efficiency loss when the seller has to estimate the buyer's willingness to pay JO - RAIRO - Operations Research - Recherche Opérationnelle PY - 2014 SP - 477 EP - 496 VL - 48 IS - 4 PB - EDP-Sciences UR - http://archive.numdam.org/articles/10.1051/ro/2014018/ DO - 10.1051/ro/2014018 LA - en ID - RO_2014__48_4_477_0 ER -

%0 Journal Article %A Brusset, Xavier %T Estimating the supply chain efficiency loss when the seller has to estimate the buyer's willingness to pay %J RAIRO - Operations Research - Recherche Opérationnelle %D 2014 %P 477-496 %V 48 %N 4 %I EDP-Sciences %U http://archive.numdam.org/articles/10.1051/ro/2014018/ %R 10.1051/ro/2014018 %G en %F RO_2014__48_4_477_0

Brusset, Xavier. Estimating the supply chain efficiency loss when the seller has to estimate the buyer's willingness to pay. RAIRO - Operations Research - Recherche Opérationnelle, Volume 48 (2014) no. 4, pp. 477-496. doi : 10.1051/ro/2014018. http://archive.numdam.org/articles/10.1051/ro/2014018/

[1] An, Logconcavity versus logconvexity: a complete characterization. J. Econ. Theory 80 (1998) 360-369. | MR | Zbl

[2] Supply contracts with quantity commitments and stochastic demand, in Quantitative models for supply chain management, edited by S. Tayur, R. Ganeshan, and M. Magazine. Kluwer Academic, Dordrecht, Holland (1998) 197-232. | Zbl

and ,[3] Log-concave probability and its applications, Econ. Theory 26 (2005) 445-469. | MR | Zbl

and ,[4] Mathematical theory of reliability. John Wiley & Sons (1965) Chap. 1, 9-18, | MR | Zbl

and ,[5] Regulation and information in a continuing relationship. Inf. Econ. Policy 1 (1984) 267-302.

and ,[6] Multi-period contracts in transport under asymmetric information and prior investments, in Logistik management, systeme, methoden, integration, edited by S. Voß, J. Pahl and S. Schwarze. Business and Economics, Springer-Verlag Berlin, Heidelberg (2009) 37-54.

,[7] Modeling contractual relationships in transport, Ph.D. Thesis, Louvain School of Management, Louvain la Neuve, Belgium (2010).

,[8] Supply chain coordination with contracts, in Handbooks in operations research and management science: Supply chain management, edited by Ton de Kok and S. Graves, Vol. 11, Elsevier (2004) 229-340.

,[9] Contracting to assure supply: how to share demand forecasts in a supply chain. Manage. Sci. 47 (2001) 629-646. | Zbl

and ,[10] Game theory in supply chain analysis, in Handbook of quantitative supply chain analysis - modeling in the eBusiness era, 1 ed., International Series in Operations Research & Management Science. Springer Science, New York, NY (2004) Chap. 2, 13-66. | Zbl

and ,[11] Information sharing and supply chain coordination, in Handbooks in operations research and management science: Supply chain management, edited by T. de Kok and S. Graves, Vol. 11, Elsevier (2004) 341-421. | Zbl

,[12] Handbook of quantitative supply chain analysis, in Integrated production and distribution operations, Kluwer Academic Publishers (2004), Chap. 17, 711-745. | Zbl

,[13] Strategic information sharing in a supply chain. Eur. J. Oper. Res. 174 (2006) 1567-1579. | Zbl

and ,[14] Stochastic inventory systems in a supply chain with asymmetric information: Cycle stocks, safety stocks, and consignment stock. Oper. Res. 49 (2001) 487-500. | MR | Zbl

,[15] A supplier's optimal quantity discount policy under asymmetric information. Manage. Sci. 46 (2000) 444-450. | Zbl

and ,[16] Designing supply contracts: contract type and information asymmetry, in Quantitative models for Supply Chain Management, edited by S. Tayur, R. Ganeshan and M. Magazine. Kluwer Academic, Dordrecht, Holland (1999) 234-267. | Zbl

and ,[17] Game theory, Chap. Bayesian games and mechanism design. MIT Press (1991) 243-318. | MR

and ,[18] Game theory for applied economists, Princeton University Press, Princeton, NJ, USA (1992).

,[19] An introduction to applicable game theory. J. Econ. Perspect. 11 (1997) 127-149.

,[20] Supplier-buyer contracting: Asymmetric cost information and cutoff level policy for buyer participation. Nav. Res. Logist. 48 (2001) 41-64. | MR | Zbl

,[21] Games with incomplete information played by “Bayesian” players. Manage. Sci. 14 (1967) 159-182, 320-334, 486-502. | MR | Zbl

,[22] Games with incomplete information played by “Bayesian” players, i-iii. Management Sci. 50 (2004) 1804-1817. | Zbl

,[23] Supply chain contracting and coordination with stochastic demand, in Quantitative models for supply chain management, edited by S. Tayur, R. Ganeshan and M. Magazine. Kluwer Academic, Dordrecht, Holland (1999) 234-267. | Zbl

,[24] A note on probability distributions with increasing generalized failure rates. Oper. Res. 54 (2006) 602-604. | MR | Zbl

,[25] Selling to the newsvendor: an analysis of price-only contracts. Manuf. Serv. Oper. Manag. 3 (2001) 293-305.

and ,[26] Game theoretic applications in supply chain management: a review. Information Systems Oper. Res. 43 (2005) 187-220. | MR

and ,[27] An introduction to game-theoretic modelling. Addison Wesley, Redwood City, California, USA (1992). | MR | Zbl

,[28] A note on closure properties of failure rate distributions. Oper. Res. 53 (2005) 733-734. | Zbl

,[29] On the unimodality of the manufacturer's objective function in the newsvendor problem. Oper. Res. Lett. 34 (2006) 46-48. | MR | Zbl

,[30] Perfect equilibrium in a bargaining model. Econometrica 54 (1982) 97-109. | MR | Zbl

,[31] Quantitative models for supply chain management, 1 ed., Int. Ser. Operat. Res. Manage. Sci., in Modeling supply chain contracts: A review. Kluwer Academic (1999), Chap. 10, 299-336. | Zbl

, and ,[32] Counterspeculation, auctions, and competitive sealed tenders. J. Finance 16 (1961) 8-37.

,[33] Optimal pricing for a service facility, Working paper, in proc. School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, GA (2004).

, and ,[34] Relationships among three assumptions in revenue management. Oper. Res. 52 (2004) 804-809. | MR | Zbl

, and ,*Cited by Sources: *