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Article: Considering asymmetrical manufacturing cost information in a two-echelon system that uses price-only contracts

TitleConsidering asymmetrical manufacturing cost information in a two-echelon system that uses price-only contracts
Authors
Issue Date2006
PublisherTaylor & Francis Inc. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/0740817x.asp
Citation
Iie Transactions (Institute Of Industrial Engineers), 2006, v. 38 n. 3, p. 253-271 How to Cite?
AbstractConsider a basic "price-only" supply chain interaction in which the "players" are a manufacturer and a retailer. The manufacturer sets the wholesale price ($w/unit) of a product she supplies to a retailer, who in turn sets the retail price ($p/ unit) at which he sells to the consumers. The product's demand curve is a function of p. The players select to play one of several non-cooperative games such as the manufacturer-Stackelberg game. How should the players set their prices w and p? Most existing studies assume information symmetry i.e., the cost and market parameters are known equally and perfectly to both players. In reality, the retailer's knowledge of the manufacturing cost c is often controlled by the manufacturer. This paper considers explicitly the asymmetry of knowledge in c. This approach reveals interesting and surprising deviations from earlier symmetrical-c-knowledge results. Moreover, the approach also ameliorates some of the internal inconsistencies within the symmetric-information framework. We also show how the effect of knowledge asymmetry varies with the shape of the demand curve and with the degree of relative dominance between the players. We find that under a linear demand curve a manufacturer should overstate c, which is an intuitively expected result. However, under an iso-elastic demand curve she benefits herself and the entire system by under stating c, which is counter-intuitive. Also, under asymmetric c -knowledge, the simultaneous decision (or "vertical Nash") game becomes non-viable under a linear demand curve, but the game becomes quite viable and desirable under an iso-elastic demand curve. Copyright © 2006 "IIE".
Persistent Identifierhttp://hdl.handle.net/10722/177960
ISSN
2015 Impact Factor: 1.463
2015 SCImago Journal Rankings: 1.293
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorLau, AHLen_US
dc.contributor.authorLau, HSen_US
dc.contributor.authorZhou, YWen_US
dc.date.accessioned2012-12-19T09:40:59Z-
dc.date.available2012-12-19T09:40:59Z-
dc.date.issued2006en_US
dc.identifier.citationIie Transactions (Institute Of Industrial Engineers), 2006, v. 38 n. 3, p. 253-271en_US
dc.identifier.issn0740-817Xen_US
dc.identifier.urihttp://hdl.handle.net/10722/177960-
dc.description.abstractConsider a basic "price-only" supply chain interaction in which the "players" are a manufacturer and a retailer. The manufacturer sets the wholesale price ($w/unit) of a product she supplies to a retailer, who in turn sets the retail price ($p/ unit) at which he sells to the consumers. The product's demand curve is a function of p. The players select to play one of several non-cooperative games such as the manufacturer-Stackelberg game. How should the players set their prices w and p? Most existing studies assume information symmetry i.e., the cost and market parameters are known equally and perfectly to both players. In reality, the retailer's knowledge of the manufacturing cost c is often controlled by the manufacturer. This paper considers explicitly the asymmetry of knowledge in c. This approach reveals interesting and surprising deviations from earlier symmetrical-c-knowledge results. Moreover, the approach also ameliorates some of the internal inconsistencies within the symmetric-information framework. We also show how the effect of knowledge asymmetry varies with the shape of the demand curve and with the degree of relative dominance between the players. We find that under a linear demand curve a manufacturer should overstate c, which is an intuitively expected result. However, under an iso-elastic demand curve she benefits herself and the entire system by under stating c, which is counter-intuitive. Also, under asymmetric c -knowledge, the simultaneous decision (or "vertical Nash") game becomes non-viable under a linear demand curve, but the game becomes quite viable and desirable under an iso-elastic demand curve. Copyright © 2006 "IIE".en_US
dc.languageengen_US
dc.publisherTaylor & Francis Inc. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/0740817x.aspen_US
dc.relation.ispartofIIE Transactions (Institute of Industrial Engineers)en_US
dc.titleConsidering asymmetrical manufacturing cost information in a two-echelon system that uses price-only contractsen_US
dc.typeArticleen_US
dc.identifier.emailLau, AHL: ahlau@business.hku.hken_US
dc.identifier.authorityLau, AHL=rp01072en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1080/07408170590961148en_US
dc.identifier.scopuseid_2-s2.0-32144461786en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-32144461786&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume38en_US
dc.identifier.issue3en_US
dc.identifier.spage253en_US
dc.identifier.epage271en_US
dc.identifier.isiWOS:000235710600007-
dc.publisher.placeUnited Statesen_US
dc.identifier.scopusauthoridLau, AHL=7202626080en_US
dc.identifier.scopusauthoridLau, HS=7201497264en_US
dc.identifier.scopusauthoridZhou, YW=7405366443en_US
dc.identifier.citeulike499079-

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