Essays On Supply Chain Contracting Under System Parameter Uncertainties

With the development of economic globalization and integration, the future market competitions are not limited to the competition among individual companies; instead, they gradually evolve to the competition among supply chains. Thus, supply chain management has been attracting more and more attention of practitioners and researchers. As an increasingly common management idea and method, supply chain management emphasizes on improving the overall performance of a supply chain to enhance its competitiveness. However, each member in a two-echelon supply chain belongs to different firms which often have different or conflicting objectives, the decisions they obtained independently may degenerate the channel efficiency. In order to achieve the optimal outcome of an integrated supply chain, it is necessary to design appropriate contract formats that specify a set of transfer payment terms to restrain and coordinate the actions of each member. In the meantime, it is now well-recognized that the supply chain members may conceal private information for individual interest. In this situation, optimal supply chain performance requires not only the coordination of actions, but also the sharing of information among supply chain members. Hence, the dominant player has to take information asymmetry into account when he designs the contract terms. The three essays of this dissertation comprise an analysis of supply chain contracting with information asymmetry consideration under different channel structure and managerial concerns.In the first essay, we consider three"revenue sharing"variants (hereafter"[RS]") and illustrate their significant performance differences under system-parameter uncertainties. For a product with price-dependent demand, it is well-known that if a dominant manufacturer knows the system parameters deterministically, then the conventional [RS] gives him the"perfect power"of simultaneously coordinating the channel and allocating profit arbitrarily. Unfortunately, [RS]'s power deteriorates as the manufacturer's knowledge of the system parameters becomes increasingly uncertain. This essay shows that this deterioration can be substantially reduced by using slightly modified versions of [RS]; these modifications roughly amount to sharing a retailer's"gross profit"instead of"revenue."In other words, this essay presents simple modifications to the"classical"[RS], leading to contract formats that perform substantially better under system-parameter uncertainty. In the second essay, we use a simple and parsimonious model to investigate the performance of volume discounting schemes (hereafter"[VD]") in a with-effort channel; i.e., one where demand is sensitive to both retail price and sales effort. The problem is analyzed as a manufacturer-leading Stackelberg game. We first present, for the deterministic-system parameter situation, contract-designing procedures under two contract formats; namely, a regular"version"of [VD] (hereafter"[RVD]") and a continuous"version"of [VD] (hereafter"[CVD]"). Our solutions show that [RVD] cannot perfectly coordinate this with-effort channel; moreover, very often [RVD] leads to a lower channel efficiency than the simple price-only contract. In contrast, we show that [CVD] leads to perfect channel coordination—a significant result since most contract formats have been shown in the literature to be unable to coordinate a with-effort channel. Next, we consider the more realistic situations in which the manufacturer is uncertain about one of the system parameters -- specifically, either the market size"a"or the effort cost"η". Our results show that, if Manu is uncertain about a, [RVD] becomes useless but the manufacturer can still use [CVD] to benefit himself. When the manufacturer is uncertain aboutη, [CVD] remains useful (as expected); however, surprisingly, [RVD] can outperform [CVD] when both the mean value and the uncertainty ofηare sufficient high. These results underline the necessity of evaluating a contract format under various forms of system-parameter uncertainties--often at the expense of analytical tractability.In the third essay, we study a new and controversial"slotting fee"contract (hereafter"[SF]"); i.e., an upfront fee a manufacturer is required to pay a retailer in order to have his product sold on the retailer's shelves. It is becoming increasingly common, but also widely criticized in mass media and the academic literature. This essay evaluates SF in the context of a Stackelberg-dominant retailer selling a newsvendor product whose demand is affected by both retail price and sales effort. First, under the deterministic information scenario, we show that, contradicting intuition and its negative public image, choosing SF often can benefit all the stakeholder-groups in the channel. That is, not only will the retailer's profit increases, but the production workers are asked to produce more and the consumers pay a lower retail price. Moreover, the dominant retailer is in a better"mood"to increase the supplier's profit due to the higher total channel profit. However, this basic SF still cannot perfectly coordinate the channel. In order to fill the gap in the literature, we proposed a new practical contract format that can perfectly coordinate our channel. This new"composite"contract format incorporates features from SF as well as the"buyback"contract format. We are unaware of any other contract format in the literature that can perfectly coordinate a dominant-retailer newsvendor-product channel in which the demand is sensitive to both price and effort. At last, we investigated the robustness of our new composite contract format and its promising competitors under system-parameter uncertainty. We show that our new composite format maintains it superiority over other alternatives when the contract-designing dominant retailer is uncertain about the manufacturer's cost.