A supplier’s optimal quantity discount policy under asymmetric information. (English) Zbl 1231.90024

Corbett, Charles J.; De Groote, Xavier

Manage. Sci. 46, No. 3, 444-450 (2000).

Summary: 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.

MSC:

90B05

Inventory, storage, reservoirs

Keywords:

supply contracts; asymmetric information