Journal
MANAGEMENT SCIENCE
Volume 46, Issue 3, Pages 444-450Publisher
INST OPERATIONS RESEARCH MANAGEMENT SCIENCES
DOI: 10.1287/mnsc.46.3.444.12065
Keywords
supply contracts; coordination; lot sizing; quantity discounts; asymmetric information
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In the supply-chain literature, an increasing body of work studies how suppliers can use incentive schemes such as quantity discounts to influence buyers' ordering behaviour, thus reducing the supplier's (and the total supply chain's) costs. Various functional forms for such incentive schemes have been proposed, but a critical assumption always made is that the supplier has full information about the buyer's cost structure. We derive the optimal quantity discount policy under asymmetric information and compare it to the situation where the supplier has full information.
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