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Article: Supply contracting and process innovation in a dynamic supply chain with information asymmetry

TitleSupply contracting and process innovation in a dynamic supply chain with information asymmetry
Authors
KeywordsOR in research and development
Supply chain
Process innovation
Wholesale contract
Information asymmetry
Issue Date2021
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ejor
Citation
European Journal of Operational Research, 2021, v. 288 n. 2, p. 552-562 How to Cite?
AbstractWe investigate the process innovation and contracting decisions of a dynamic supply chain consisting of a supplier and a manufacturer, with the manufacturer possessing private information about her efficiency of process innovation. To overcome the potential adverse selection problem due to the asymmetric information, the supplier designs a menu of supply contracts that stipulates both the wholesale price and the purchasing quantity. We find that under information asymmetry, the supplier will optimally set a higher wholesale price but a lower purchasing quantity for the manufacturer with high innovation efficiency than that for the manufacturer with low innovation efficiency. As a consequence, the manufacturer with high innovation efficiency will significantly underinvest in innovation due to information asymmetry in addition to the impact of the double marginalization effect. Moreover, although a longer contract period tends to better motivate innovation, it can also magnify the influences of adverse selection on supply chain contracting, leading to a higher wholesale price for the manufacturer with high innovation efficiency.
Persistent Identifierhttp://hdl.handle.net/10722/286216
ISSN
2019 Impact Factor: 4.213
2015 SCImago Journal Rankings: 2.595

 

DC FieldValueLanguage
dc.contributor.authorNI, J-
dc.contributor.authorZHAO, J-
dc.contributor.authorChu, LK-
dc.date.accessioned2020-08-31T07:00:47Z-
dc.date.available2020-08-31T07:00:47Z-
dc.date.issued2021-
dc.identifier.citationEuropean Journal of Operational Research, 2021, v. 288 n. 2, p. 552-562-
dc.identifier.issn0377-2217-
dc.identifier.urihttp://hdl.handle.net/10722/286216-
dc.description.abstractWe investigate the process innovation and contracting decisions of a dynamic supply chain consisting of a supplier and a manufacturer, with the manufacturer possessing private information about her efficiency of process innovation. To overcome the potential adverse selection problem due to the asymmetric information, the supplier designs a menu of supply contracts that stipulates both the wholesale price and the purchasing quantity. We find that under information asymmetry, the supplier will optimally set a higher wholesale price but a lower purchasing quantity for the manufacturer with high innovation efficiency than that for the manufacturer with low innovation efficiency. As a consequence, the manufacturer with high innovation efficiency will significantly underinvest in innovation due to information asymmetry in addition to the impact of the double marginalization effect. Moreover, although a longer contract period tends to better motivate innovation, it can also magnify the influences of adverse selection on supply chain contracting, leading to a higher wholesale price for the manufacturer with high innovation efficiency.-
dc.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ejor-
dc.relation.ispartofEuropean Journal of Operational Research-
dc.subjectOR in research and development-
dc.subjectSupply chain-
dc.subjectProcess innovation-
dc.subjectWholesale contract-
dc.subjectInformation asymmetry-
dc.titleSupply contracting and process innovation in a dynamic supply chain with information asymmetry-
dc.typeArticle-
dc.identifier.emailChu, LK: lkchu@hku.hk-
dc.identifier.authorityChu, LK=rp00113-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.ejor.2020.06.008-
dc.identifier.scopuseid_2-s2.0-85087220455-
dc.identifier.hkuros313641-
dc.identifier.volume288-
dc.identifier.issue2-
dc.identifier.spage552-
dc.identifier.epage562-
dc.publisher.placeNetherlands-

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