Moral Hazard Based On The Manufacturer's Supply Chain

Nowadays, the competition of the market is becoming more and more intense and the demand of the customer is constantly changing. In this background, the modern management theory of Supply Chain Management(SCM), with its purposes to response the market quickly, satisfy the various demand of customer, increase the flexibility and reduce the cost, has obtained huge economic benefits in practice and has been accepted by both the global business circles and the academia. Actually, the system of SCM is the alliance of several interest-independent agents. Because the existence of private information in the supply chain members, the problems of asymmetric information arise from time to time, and then have a crisis of moral hazard. The manufacturer as the core enterprises must build up effective stimulating mechanism, so as to avoid moral hazard or reduce the harm of moral harm, to harmonize the relationship with the supplier and retailer, to improve the enthusiasm of them.This article first expounds some of the essential problem in the supply chain, including the role of manufacturer in the supply chain, and discusses the moral hazard in supply chain. And then this article gives an emphasis account of moral hazard, describing the form of moral hazard. Second, this paper studies how to avoid retailers' moral hazard by manufacturer. In the guidance of the static theory of transfer payments, it mocks the supply chain making up by a manufacturer and a retailer and by a manufacturer and a number of retailers, establishes mathematical models, and designs incentives mechanism to prevent moral hazard. Then, it verifies the results of the incentive mechanism by numerical examples and supplies some qualitative methods to avoid moral hazard. Third, this article researches the suppliers' moral hazard. It mocks a moral hazard of supplier by modeling: the manufacturer hopes that the suppliers would make research to reduce the cost of intermediate goods, but the suppliers are reluctant to make it for increasing the cost unless incentives by manufacturer. However, general incentives mechanism couldn't prevent moral hazard. This article designs the parameters of incentives mechanism to void moral hazard. Finally, it makes a numerical example to verify the parameters.This paper establishes mathematical models from the perspective of manufacturer, and analyzes retailers' moral hazard and suppliers' moral hazard, to find a way to avoid risk. Thus it enriches the content of the study of this field, having practical significance.