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Title: Essays on supply chain contracting under system parameter uncertainties
Other Titles: Xin xi bu dui cheng qing kuang xia de gong ying lian qi yue zhi ding
Authors: Wang, Yaoyu ( 王要玉)
Department: Department of Management Sciences
Degree: Doctor of Philosophy
Issue Date: 2011
Publisher: City University of Hong Kong
Subjects: Business logistics.
Contracting out.
Information asymmetry.
Notes: CityU Call Number: HD38.5 .W3655 2011
xi, 120 leaves : ill. 30 cm.
Thesis (Ph.D.)--City University of Hong Kong, 2011.
Includes bibliographical references (leaves 110-120)
Type: thesis
Abstract: Consider a basic two-echelon supply chain with a manufacturer selling a product to a retailer, who in turn retails it to the ending consumers. A fundamental interaction of the two players (i.e., the manufacturer and the retailer) is the "contract scheme" specifying how the "players" have to compensate each. The three essays of this dissertation comprise an analysis of these conventional contract forms as well as developing new schemes under different channel structures with asymmetric information. In the first essay, we consider three "revenue sharing" variants (hereafter "[RS]") and illustrate their significant performance differences under system-parameter uncertainties. For a product with price-dependent demand, it is well-known that if a dominant manufacturer knows the system parameters deterministically, then the conventional [RS] gives him the "perfect power" of simultaneously coordinating the channel and allocating profit arbitrarily. Unfortunately, [RS]'s power deteriorates as the manufacturer's knowledge of the system parameters becomes increasingly uncertain. This essay shows that this deterioration can be substantially reduced by using slightly modified versions of [RS]; these modifications roughly amount to sharing a retailer's "gross profit" instead of "revenue." In other words, this essay presents simple modifications to the "classical" [RS], leading to contract formats that perform substantially better under system-parameter uncertainty. In the second essay, we use a simple and parsimonious model to investigate the performance of volume discounting schemes (hereafter "[VD]") in a with-effort channel; i.e., one where demand is sensitive to both retail price and sales effort. The problem is analyzed as a manufacturer-leading Stackelberg game. We first present, for the deterministic-system parameter situation, contract-designing procedures under two contract formats; namely, a regular "version" of [VD] (hereafter "[RVD]") and a continuous "version" of [VD] (hereafter "[CVD]"). Our solutions show that [RVD] cannot perfectly coordinate this with-effort channel; moreover, [RVD] often leads to a lower channel efficiency than the simple price-only contract. In contrast, we show that [CVD] leads to perfect channel coordination - a significant result since most contract formats have been shown in the literature to be unable to coordinate a with-effort channel. Next, we consider the more realistic situations in which the manufacturer is uncertain about one of the system parameters -- specifically, either the market size "a" or the effort cost "ƞ". Our results show that, if Manu is uncertain about a, [RVD] becomes useless but the manufacturer can still use [CVD] to benefit himself. When the manufacturer is uncertain about ƞ, [CVD] remains useful (as expected); however, surprisingly, [RVD] can outperform [CVD] when both the mean value and the uncertainty of ƞ are sufficient high. These results underline the necessity of evaluating a contract format under various forms of system-parameter uncertainties--often at the expense of analytical tractability. In the third essay, we study a new and controversial "slotting fee" contract (hereafter "[SF]"); i.e., an upfront fee a manufacturer is required to pay a retailer in order to have his product sold on the retailer's shelves. The question we pose is: given that a Stackelberg-dominant retailer of a newsvendor product has to choose a pricing contract with which she transacts with the supplier, how would the supply-chain stakeholders fare when the retailer implements [SF] instead of another practical pricing contract? We show that, contradicting its negative public image, choosing [SF] can often provide a better outcome for all the stakeholder-groups. That is, the supplier's and the retailer's profits are higher, the production workers are asked to produce more, and the consumers pay a lower retail price. We also propose a new "composite" contract format that incorporates both the slotting-fee and "buyback" features. This composite format performs even better than the basic [SF].
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