Contract design for a closed-loop supply chain considering information asymmetry of remanufacturing process innovation
Contract design for a closed-loop supply chain considering information asymmetry of remanufacturing process innovation
Purpose: asymmetric cost information exists between a supplier and a manufacturer regarding the manufacturer's process innovation for remanufacturing (PIR), which may hurt the supplier's profit. The authors therefore seek to develop a menu of nonlinear pricing contracts for channel information sharing.
Design/methodology/approach: based on principal–agent theory, the supplier, acting as a Stackelberg leader, designs a menu of nonlinear pricing contracts to impel the manufacturer to disclose its private cost information on PIR (i.e. PIR efficiency). In addition, the authors compare the equilibrium outcomes under asymmetric and symmetric information to examine the effects of asymmetric PIR information on the production policies and profits of the supplier and the manufacturer.
Findings: the proposed contract menu encourages th4e manufacturer to spontaneously share PIR efficiency information with the supplier. Asymmetric PIR information may distort the output of new products upward or downward, but the output of remanufactured products may only be distorted downward. In addition, the manufacturer with high PIR efficiency gains information rent, and interestingly, the increase in the probability of low PIR efficiency amplifies its information rent. Finally, an asymmetric information environment may increase the threshold for the manufacturer to enter remanufacturing.
Originality/value: the authors probe the issue of the supplier's contract design by jointly considering remanufacturing, process innovation and information asymmetry. The paper expands the influencing mechanism of process innovation information in the remanufacturing field. The authors also observe new results that may offer guidance to decision makers.
Asymmetric information, Principal–agent model, Process innovation for remanufacturing, Supply chain management
Zhao, Senlin
0e2ffe1c-0476-47ca-8500-9c8a42e50c06
Mao, Rongrong
4fff6785-e99c-4f9a-86b7-662cac7b92f8
5 May 2023
Zhao, Senlin
0e2ffe1c-0476-47ca-8500-9c8a42e50c06
Mao, Rongrong
4fff6785-e99c-4f9a-86b7-662cac7b92f8
Zhao, Senlin and Mao, Rongrong
(2023)
Contract design for a closed-loop supply chain considering information asymmetry of remanufacturing process innovation.
Kybernetes.
(doi:10.1108/k-08-2022-1196).
Abstract
Purpose: asymmetric cost information exists between a supplier and a manufacturer regarding the manufacturer's process innovation for remanufacturing (PIR), which may hurt the supplier's profit. The authors therefore seek to develop a menu of nonlinear pricing contracts for channel information sharing.
Design/methodology/approach: based on principal–agent theory, the supplier, acting as a Stackelberg leader, designs a menu of nonlinear pricing contracts to impel the manufacturer to disclose its private cost information on PIR (i.e. PIR efficiency). In addition, the authors compare the equilibrium outcomes under asymmetric and symmetric information to examine the effects of asymmetric PIR information on the production policies and profits of the supplier and the manufacturer.
Findings: the proposed contract menu encourages th4e manufacturer to spontaneously share PIR efficiency information with the supplier. Asymmetric PIR information may distort the output of new products upward or downward, but the output of remanufactured products may only be distorted downward. In addition, the manufacturer with high PIR efficiency gains information rent, and interestingly, the increase in the probability of low PIR efficiency amplifies its information rent. Finally, an asymmetric information environment may increase the threshold for the manufacturer to enter remanufacturing.
Originality/value: the authors probe the issue of the supplier's contract design by jointly considering remanufacturing, process innovation and information asymmetry. The paper expands the influencing mechanism of process innovation information in the remanufacturing field. The authors also observe new results that may offer guidance to decision makers.
This record has no associated files available for download.
More information
Accepted/In Press date: 2023
Published date: 5 May 2023
Keywords:
Asymmetric information, Principal–agent model, Process innovation for remanufacturing, Supply chain management
Identifiers
Local EPrints ID: 488703
URI: http://eprints.soton.ac.uk/id/eprint/488703
ISSN: 0368-492X
PURE UUID: 5ee53b33-9a9b-461a-900a-8f07f700872b
Catalogue record
Date deposited: 04 Apr 2024 16:44
Last modified: 10 Apr 2024 02:15
Export record
Altmetrics
Contributors
Author:
Senlin Zhao
Author:
Rongrong Mao
Download statistics
Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.
View more statistics