The Transmission Of Demand And Information Risk In Supply Chains Under Mono-peaked, Bounded And Symmetric Distributions

Noting that little attention is directly paid to the transmission of information riskdue to noisy information on uncertain demand, this paper use a wholesale pricecontract to build a dynamic supply chain model with a retailer and a manufacturer soas to examine the impact uncertain demand and information noise on node firms’performance and its variance. With the equilibrium, this paper studies how demand risk(measured by the variance of uncertain demand) information risk (measured by thevariance of information noise) is transmitted in the supply chain and further examineits impact on firms’ expected performance. Further, this paper build a three-stage gamemodel include an observer, a retailer and a manufacturer. With the Bayesianequilibrium, we study how corporate decisions affect the conduction of demand riskand information.The results show that (1) the manufacturer’s expect performance does not changewith information risk, while the impact of information on the retailer’s expectedperformance depends on whether the observed demand state is high, mediate or low;(2)the impact of information risk on the retailer’s and the manufacturer’s performancevariance (i.e. information risk transmission) is determined via comparing the judgmenteffect" and the decision effect.(3) the manufacturer’s expect performance does notchange with demand risk, while the impact of demand on the retailer’s expectedperformance depends on the probability density function of demand risk;(4) theimpact of demand risk on the retailer’s and the manufacturer’s performance variance isdetermined via comparing the judgment effect" and the decision effect;(5) in order toreduce the risk of demand and information, the retailer and manufacturer need to getthe full market informantion and work together.