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Estimating the supply chain efficiency loss when the seller hasto 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.. [email protected]
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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 theinterest of the manufacturer to hide this information from the supplier. The precision ofthe information available to the supplier modifies the rent distribution. The risk ofopportunistic behaviour entails a loss of efficiency in the supply chain. The model isextended to the case of a supplier submitting offers to several manufacturers. Somemanagerial 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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