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The Impact of the Manufacturer-Hired Sales Agent on a Supply Chain with Information Asymmetry

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  • Neda Ebrahim Khanjari

    (School of Business, Rutgers, The State University of New Jersey, Camden, New Jersey 08102)

  • Seyed Iravani

    (McCormick School of Engineering and Applied Science, Northwestern University, Evanston, Illinois 60208)

  • Hyoduk Shin

    (Rady School of Management, University of California, San Diego, La Jolla, California 92093)

Abstract

This paper studies the impact of a manufacturer-hired sales agent on a supply chain comprising a manufacturer and a retailer. The sales agent is working mainly at the retailer's location to boost demand. We focus on a wholesale price contract, under which the retailer decides how much to order from the manufacturer. The information structure within the supply chain and the efficiency of the sales agent affect the supply chain members' expected profits. We show that, because of the agency issue between the sales agent and the manufacturer, when the retailer's demand forecast accuracy is similar to the manufacturer's and the wholesale price is fixed, the retailer's profit decreases as his demand forecast accuracy improves. We also illustrate that when the retailer's forecast accuracy is much better than the manufacturer's and the wholesale price is endogenous, his expected profit decreases as his forecast accuracy improves. Moreover, we demonstrate that having a more efficient sales agent is beneficial for the retailer when the wholesale price is fixed, whereas this is not always the case when the wholesale price depends on the efficiency of the sales agent.

Suggested Citation

  • Neda Ebrahim Khanjari & Seyed Iravani & Hyoduk Shin, 2014. "The Impact of the Manufacturer-Hired Sales Agent on a Supply Chain with Information Asymmetry," Manufacturing & Service Operations Management, INFORMS, vol. 16(1), pages 76-88, February.
    • Handle: RePEc:inm:ormsom:v:16:y:2014:i:1:p:76-88
    DOI: 10.1287/msom.2013.0452
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    References listed on IDEAS

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    1. Leon Yang Chu & Guoming Lai, 2013. "Salesforce Contracting Under Demand Censorship," Manufacturing & Service Operations Management, INFORMS, vol. 15(2), pages 320-334, May.
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    Citations

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    Cited by:

    1. Peng, Weicai & Tian, Zhongjun, 2022. "Information acquisition, selling effort and pre-order strategy," International Journal of Production Economics, Elsevier, vol. 249(C).
    2. Ling‐Chieh Kung & Ying‐Ju Chen, 2014. "Impact of reseller's and sales agent's forecasting accuracy in a multilayer supply chain," Naval Research Logistics (NRL), John Wiley & Sons, vol. 61(3), pages 207-222, April.
    3. Xiaodong Yang & Gangshu (George) Cai & Charles A. Ingene & Jihong Zhang, 2020. "Manufacturer Strategy on Service Provision in Competitive Channels," Production and Operations Management, Production and Operations Management Society, vol. 29(1), pages 72-89, January.
    4. Binqing Xiao & Wenqiang Xiao, 2020. "Technical Note: Optimal Salesforce Compensation with Supply–Demand Mismatch Costs," Production and Operations Management, Production and Operations Management Society, vol. 29(1), pages 62-71, January.
    5. Osman Alp & Alper Şen, 2021. "Delegation of Stocking Decisions Under Asymmetric Demand Information," Manufacturing & Service Operations Management, INFORMS, vol. 23(1), pages 55-69, 1-2.
    6. Wu, Xiangxiang & Zha, Yong & Yu, Yugang, 2022. "Asymmetric retailers’ sales effort competition in the presence of a manufacturer’s help," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 159(C).
    7. Peiyang Su & Ying Peng & Qidan Hu & Ruwen Tan, 2020. "Incentive Mechanism and Subsidy Design for Construction and Demolition Waste Recycling under Information Asymmetry with Reciprocal Behaviors," IJERPH, MDPI, vol. 17(12), pages 1-26, June.
    8. Yang, Wenting & Govindan, Kannan & Zhang, Jiantong, 2023. "Spillover effects of live streaming selling in a dual-channel supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 180(C).
    9. Jiaguo Liu & Huida Zhao & Yibing Lyu & Xiaohang Yue, 2023. "The provision strategy of blockchain service under the supply chain with downstream competition," Annals of Operations Research, Springer, vol. 327(1), pages 375-400, August.
    10. Li, Xi & Liu, Qian, 2023. "Strategic ignorance: Managing endogenous demand in a supply chain," Omega, Elsevier, vol. 114(C).
    11. Fangruo Chen & Guoming Lai & Wenqiang Xiao, 2016. "Provision of Incentives for Information Acquisition: Forecast-Based Contracts vs. Menus of Linear Contracts," Management Science, INFORMS, vol. 62(7), pages 1899-1914, July.
    12. Panos Kouvelis & Duo Shi, 2020. "Who Should Compensate the Sales Agent in a Distribution Channel?," Production and Operations Management, Production and Operations Management Society, vol. 29(11), pages 2437-2460, November.
    13. Duan, Housheng & Deng, Sijing & Song, Haiqing & Xu, Jiayan, 2021. "The impacts of sales efforts and mode of payment on the competition between agent and retailer," Omega, Elsevier, vol. 103(C).

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