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Estimating the supply chain efficiency loss when the seller has to estimate the buyer’s willingness to pay. (English) Zbl 1299.91043

Summary: 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 the interest of the manufacturer to hide this information from the supplier. The precision of the information available to the supplier modifies the rent distribution. The risk of opportunistic behaviour entails a loss of efficiency in the supply chain. The model is extended to the case of a supplier submitting offers to several manufacturers. Some managerial insight through a numerical illustration is provided.

MSC:

91B25 Asset pricing models (MSC2010)
91B38 Production theory, theory of the firm
90B05 Inventory, storage, reservoirs
91A40 Other game-theoretic models
91A10 Noncooperative games
91A28 Signaling and communication in game theory
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