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Estimating the supply chain efficiency loss when the seller has to estimate the buyer’s willingness to pay

Published online by Cambridge University Press:  10 June 2014

Xavier Brusset
Xavier Brusset*
Affiliation:
ESSCA School of Management, Center of expertise and Research in Retailing, 55, Quai Alphonse Le Gallo, 92513 Boulogne Billancourt Cedex, France.. xavier.brusset@essca.fr
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Abstract

We study the pricing problem between two firms when the manufacturer’s willingness to pay (wtp) for the supplier’s good is not known by the latter. We demonstrate that it is in the interest of the manufacturer to hide this information from the supplier. The precision of the information available to the supplier modifies the rent distribution. The risk of opportunistic behaviour entails a loss of efficiency in the supply chain. The model is extended to the case of a supplier submitting offers to several manufacturers. Some managerial insight through a numerical illustration is provided.

Keywords

Supply chain managementinformation asymmetryBayesian beliefmechanism designlog-concave distributions
Type
Research Article
Information
RAIRO - Operations Research , Volume 48 , Issue 4 , October 2014 , pp. 477 - 496
Copyright
© EDP Sciences, ROADEF, SMAI 2014

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