Research On Product Quality Choice And Coordination With Contracts In Supply Chains Under Product Liability

Product harm crises caused mainly by product quality deficiencies have become one of the main risks faced by the enterprises in the supply chain.The occurrences of the product harm crises not only pose harm to consumers,but also reduce the financial performance of supply chain members.In reality,when facing the product harm crises caused by the low-quality product,supply chain members,on the one hand,choose to recall the low-quality product and compensate for consumers' harm and,on the other hand,choose to improve the level of the product quality in order to reduce the probability for the product harm crises to occur.Therefore,whether the product liability can motivate the firms to increase the level of the product quality has become an important problem that the academic circles pay attention to.In recently,the product quality in supply chains has been fully studied,but the theoretical research on product liability is still relatively scarce.The existing literature on product liability has discussed the impact of the product liability on firms' product quality level mainly from an economic point of view instead of the supply chain.In view of the deficiency of existing literature,this thesis considers how the product liability affects the manufacturer's product quality decision and studies the contract coordination mechanism of the supply chain system by building a game benchmark model.Further,we expand the above benchmark model to various operational conditions,such as there exist the mandatory recall policies implemented by the Consumer Rights and Interests Protection Agency(CRIPA),the manufacturer's preference for the corporate social responsibility and the liability cost allocation between supply chain members under different channel power structures,and then consider the impacts of the above operational conditions and the product liability on the manufacturer's product quality decisions in supply chains,and also investigate how to design contract coordination mechanisms to coordinate supply chains under various operational conditions.Firstly,under the situation of the manufacturer bearing the product liability for consumers' harm caused by the low-quality product,we study the impact of the product liability on the manufacturer's product quality decision and the corresponding contract coordination mechanism of the supply chain system.We build a game benchmark model which consists of an upstream manufacturer and a downstream retailer in supply chain.The sequences of events are as follows: firstly,the manufacturer decides the level of the product quality and offers the wholesale price to the retailer;secondly,the retailer determines the ordering quantity and sells the product to final consumers;finally,the product quality information is revealed and the manufacturer recalls the low-quality product and compensates for consumers' harm.With the game model,we obtain the equilibrium operational results in supply chain by the backward induction,and investigate the effects of the product liability,product recall cost,consumer harm and the effectiveness of remedy and the product quality improvement efficiency on the manufacturer's product quality decision,the contract relationship and the corresponding profitability for supply chain members.Further,by comparing the equilibrium results between the centralized and the decentralized supply chains,we consider the contract coordination mechanism between supply chain members.These results indicate that,on the one hand,the wholesale price serves as a medium for the manufacturer to share the ex ante expected liability cost with the retailer,making the manufacturer's product quality decision independent of any change of the product liability;and on the other hand,a contract combining a quantity discount with a quality improvement cost sharing can coordinate the supply chain.Secondly,under various operational conditions,we extend the above game benchmark model in supply chains.Firstly,under the condition that the CRIPA mandates the manufacturer to recall the low-quality product,we identify conditions on exogenous parameters under which the CRIPA chooses a full-recall policy and a non-recall policy,investigate the impact of the product liability on the manufacturer's product quality decision and consider the contract coordination mechanism of the supply chain system under different recall policies.The results show that,regardless of the mandatory recall policies,a single quantity discount contract can effectively coordinate the decentralized supply chain under the full-recall policy,while under the non-recall policy a same contract mechanism combining a quantity discount contract with a quality improvement cost sharing contract in the game benchmark model can achieve the goal of coordination.Secondly,in the case of the manufacturer equipping with the preference for the corporate social responsibility,we analyze the effects of the corporate social responsibility and the product liability on the manufacturer's product quality decision,and study the contract coordination mechanism of the supply chain system.The results reveal that the corporate social responsibility motivates themanufacturer to raise the level of the product quality while the product liability has no impact on the manufacturer's product quality decision,but the contract mechanism in the game benchmark model is still feasible to coordinate the supply chain.Finally,under different channel power structures,we investigate the impact of the allocation of the product liability cost on the manufacturer's product quality decision and study the contract coordination mechanism of the supply chain system.The results show that under the manufacturer Stackelberg game model,an increase in the manufacturer's share of the liability cost has no impact on the manufacturer's product quality decision,while under the retailer Stackelberg game model,the increase of the manufacturer's share of the liability cost motivates the manufacturer to raise its product quality level,but regardless of the channel power structures,the supply chain systems can always be coordinated by the same contract mechanism in the game benchmark model,and if the quantity discount rate meets certain conditions,the supply chains under both the manufacturer Stackelberg and the retailer Stackelberg can be coordinated by a completely same coordinating contract.In summary,this thesis mainly has three innovative contributions as follows:(1)we build a game benchmark model in supply chain where the manufacturer bears the product liability for the consumers' harm caused by the low-quality product,and reveal the influence mechanism of the product liability on the manufacturer's product quality decision;(2)we expand the above game benchmark model under various operational conditions,and investigate the effects of these operational conditions and the product liability on the manufacturer's product quality decisions;(3)we consider the contract coordination mechanism in the game benchmark model,and investigate the feasibility of the same contract mechanism to coordinate the supply chain under various operational conditions,except the CRIPA's full-recall policy.