Supply Contract Design for Competing Heterogeneous Suppliers under Asymmetric Information

Abstract

This study considers a supply chain with two heterogeneous suppliers and a common retailer whose type is either low-volume or high-volume. The retailer's type is unknown to the suppliers. The flexible supplier has a high variable cost and a low fixed cost, while the efficient supplier has a low variable cost and a high fixed cost. Each supplier offers the retailer a menu of contracts. The retailer chooses the contract that maximizes its expected profit. For this setting, we characterize the equilibrium contract menus offered by the suppliers to the retailer. We find that the equilibrium contract menus depend on which supplier-retailer match can generate the highest supply chain profit and on..