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Article: When should a manufacturer share truthful manufacturing cost information with a dominant retailer?

TitleWhen should a manufacturer share truthful manufacturing cost information with a dominant retailer?
Authors
KeywordsAsymmetric cost information
Dominant retailer
Incentive to share information
Purchase contract design
Supply chain management
Issue Date2009
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ejor
Citation
European Journal Of Operational Research, 2009, v. 197 n. 1, p. 266-286 How to Cite?
AbstractConsider a dominated manufacturer ("Manu") supplying a dominant retailer ("Reta"). Manu knows the product's unit manufacturing cost (m) deterministically, whereas Reta knows it only in the form of an a priori subjective distribution over(m, ̃). Reta may implement any one of four contract formats: price-only; franchise fee; two-part tariffs; and menu of contracts ([MC]). This paper presents two groups of results. The first-group consists of procedures for Reta to compute optimal parameters for each of these contract formats. These first-group results are then used to study: (i) the conditions under which Manu is interested in sharing his m-information and thus improving Reta's over(m, ̃)-perception; and (ii) how such information sharing conditions are affected by the contract formats. We find that: (i) Manu benefits from reducing Reta's uncertainty on her over(m, ̃)-perception only when the product's profitability is quite small; (ii) over a wide range of plausible conditions Manu benefits from a poorer quality of Reta's a prioriover(m, ̃) -perception, regardless of what contract format Reta uses; (iii) the range of conditions under which Manu benefits from a poorer quality of Reta's m-perception is not altered or narrowed by Reta's use of a more sophisticated contract format (such as [MC]), even though such "channel coordinating" contracts increase channel efficiency and Reta's profit. In short, current methods cannot motivate Manu to share m-information honestly, hence Reta should not trust the m-information provided by Manu. These results reveal an overlooked aspect amidst the popular "bigger pie" notion of supply chain cooperation and emphasize the need to develop arrangements that can truly motivate honest information sharing. © 2008 Elsevier B.V. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/85792
ISSN
2015 Impact Factor: 2.679
2015 SCImago Journal Rankings: 2.595
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorWang, JCen_HK
dc.contributor.authorLau, HSen_HK
dc.contributor.authorLau, AHLen_HK
dc.date.accessioned2010-09-06T09:09:18Z-
dc.date.available2010-09-06T09:09:18Z-
dc.date.issued2009en_HK
dc.identifier.citationEuropean Journal Of Operational Research, 2009, v. 197 n. 1, p. 266-286en_HK
dc.identifier.issn0377-2217en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85792-
dc.description.abstractConsider a dominated manufacturer ("Manu") supplying a dominant retailer ("Reta"). Manu knows the product's unit manufacturing cost (m) deterministically, whereas Reta knows it only in the form of an a priori subjective distribution over(m, ̃). Reta may implement any one of four contract formats: price-only; franchise fee; two-part tariffs; and menu of contracts ([MC]). This paper presents two groups of results. The first-group consists of procedures for Reta to compute optimal parameters for each of these contract formats. These first-group results are then used to study: (i) the conditions under which Manu is interested in sharing his m-information and thus improving Reta's over(m, ̃)-perception; and (ii) how such information sharing conditions are affected by the contract formats. We find that: (i) Manu benefits from reducing Reta's uncertainty on her over(m, ̃)-perception only when the product's profitability is quite small; (ii) over a wide range of plausible conditions Manu benefits from a poorer quality of Reta's a prioriover(m, ̃) -perception, regardless of what contract format Reta uses; (iii) the range of conditions under which Manu benefits from a poorer quality of Reta's m-perception is not altered or narrowed by Reta's use of a more sophisticated contract format (such as [MC]), even though such "channel coordinating" contracts increase channel efficiency and Reta's profit. In short, current methods cannot motivate Manu to share m-information honestly, hence Reta should not trust the m-information provided by Manu. These results reveal an overlooked aspect amidst the popular "bigger pie" notion of supply chain cooperation and emphasize the need to develop arrangements that can truly motivate honest information sharing. © 2008 Elsevier B.V. All rights reserved.en_HK
dc.languageengen_HK
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ejoren_HK
dc.relation.ispartofEuropean Journal of Operational Researchen_HK
dc.rightsEuropean Journal of Operational Research . Copyright © Elsevier BV.en_HK
dc.subjectAsymmetric cost informationen_HK
dc.subjectDominant retaileren_HK
dc.subjectIncentive to share informationen_HK
dc.subjectPurchase contract designen_HK
dc.subjectSupply chain managementen_HK
dc.titleWhen should a manufacturer share truthful manufacturing cost information with a dominant retailer?en_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0377-2217&volume=197&spage=266&epage=286&date=2009&atitle=When+Should+a+Manufacturer+Share+Truthful+Manufacturing+Cost+Information+with+a+Dominant+Retailer?en_HK
dc.identifier.emailWang, JC: wangjc@business.hku.hken_HK
dc.identifier.emailLau, AHL: ahlau@business.hku.hken_HK
dc.identifier.authorityWang, JC=rp01107en_HK
dc.identifier.authorityLau, AHL=rp01072en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.ejor.2008.06.001en_HK
dc.identifier.scopuseid_2-s2.0-59649096469en_HK
dc.identifier.hkuros166511en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-59649096469&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume197en_HK
dc.identifier.issue1en_HK
dc.identifier.spage266en_HK
dc.identifier.epage286en_HK
dc.identifier.eissn1872-6860-
dc.identifier.isiWOS:000264387400028-
dc.publisher.placeNetherlandsen_HK
dc.identifier.scopusauthoridWang, JC=15838282400en_HK
dc.identifier.scopusauthoridLau, HS=7201497264en_HK
dc.identifier.scopusauthoridLau, AHL=7202626080en_HK
dc.identifier.citeulike4938984-

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