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Reputation compensation for incentive alignment in a supply chain with trade credit under information asymmetry.
- Source :
- Annals of Operations Research; Dec2023, Vol. 331 Issue 1, p581-604, 24p
- Publication Year :
- 2023
-
Abstract
- This paper examines a two-period dynamic contracting in a supply chain under information asymmetry, where a supplier sells a product to a retailer via a trade credit contract. It is found that the retailer always prefers to conceal her actual cost information thus signal as a higher-cost type in the first period to pursue a higher information rent, which would decrease the supplier's profit and thereby the overall profit of the supply chain. To mitigate this ratchet effect, we introduce a reputation compensation mechanism in the two-period trade credit setting. This mechanism could alleviate the information asymmetry to a certain extent as there exists a threshold that incentivizes the retailer to share her true cost information in the earlier period. Moreover, the retailer might claim as a lower-cost type when the supplier offers a relatively higher reputation compensation to take full advantage of her information. Therefore, the supplier should provide trade credit with a reasonable reputation compensation in a two-period setting to enhance his expected profit. [ABSTRACT FROM AUTHOR]
- Subjects :
- INFORMATION asymmetry
REPUTATION
SUPPLY chains
SUPPLIERS
RATCHETS
Subjects
Details
- Language :
- English
- ISSN :
- 02545330
- Volume :
- 331
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- Annals of Operations Research
- Publication Type :
- Academic Journal
- Accession number :
- 173924686
- Full Text :
- https://doi.org/10.1007/s10479-023-05478-0