Risk sharing and information revelation mechanism of a one-manufacturer and one-retailer supply chain facing an integrated competitor |
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Authors: | Tiaojun Xiao Danqin Yang |
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Institution: | School of Management Science and Engineering, Nanjing University, Hankou Road 22, Nanjing, Jiangsu 210093, China |
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Abstract: | This paper develops an information revelation mechanism model of a one-manufacturer and one-retailer supply chain facing an outside integrated-competitor under demand uncertainty. We investigate how the manufacturer designs a wholesale price-order quantity contract to induce the retailer to report his risk sensitivity information truthfully. We try to explore the effects of the outside competitor and the risk-sharing rule on the optimal price-service level decisions of the retailer and the optimal wholesale prices of the manufacturer. We find that the strategic interaction plays an important role in the effect of risk sensitivity on the order quantity for the retailer. When the fraction of the risk cost shared by the manufacturer is sufficiently large (small), the optimal wholesale price for the high risk-averse retailer is higher (lower) than that for the low risk-averse retailer. |
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Keywords: | Revelation principle Risk sensitivity Risk sharing Supply chain management Game theory |
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