Quantity-payment versus two-part tariff contracts in an assembly system with asymmetric cost information

This paper investigates an assembly system that consists of one assembler and two suppliers wherein one supplier possesses private cost information. The authors explore how in such a setting, the contract type (quantity-payment versus two-part tariff) and contracting sequence (simultaneous versus sequential) between the assembler and its suppliers influence the channel and individual firms’ performances. Their results for the basic model show the following: (1) Coordinating the purchase quantities from both suppliers does not always increase the channel’s and the assembler’s profits. (2) The assembler obtains the highest profit under a quantity-payment contract with sequential contracting. (3) The supplier with private information and the channel both prefer a two-part tariff contract over a quantity-payment contract. The authors also extend their basic model to a case where the assembler contracts with one supplier under a two-part tariff contract and with the other under a quantity-payment contract. They identify the firms’ equilibrium decisions and preferences over different contract types and contracting sequences.


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  • Accession Number: 01718427
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jul 31 2019 3:05PM