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Decentralization Policies for Supply Chain Investments Under Asymmetric Information

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  • Per Joakim Agrell
  • Peter Bogetoft

Abstract

Supply chains need specific investments for improved performance in terms of lead‐time, cost, and quality. We study the contractual choice of a coordinator to either centralize or delegate the investment decision in a three‐stage chain. The analysis derives closed‐form results for the economic performance of three decentralized contracting schemes under asymmetric information on investment cost, as well as the optimal full revelation results. The results show that the observed practice of tier‐1 delegated investments leads to relatively poor performance because of underinvestment. We illustrate the findings with the Boeing 787 debacle. Copyright © 2016 John Wiley & Sons, Ltd.

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  • Per Joakim Agrell & Peter Bogetoft, 2017. "Decentralization Policies for Supply Chain Investments Under Asymmetric Information," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(3), pages 394-408, April.
    • Handle: RePEc:wly:mgtdec:v:38:y:2017:i:3:p:394-408
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    Cited by:

    1. Gurmeet Singh & Indranil Biswas & Samir K Srivastava, 2023. "Managing supply chain with green and non‐green products: Channel coordination and information asymmetry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1359-1372, March.
    2. Fei Tang & Ying Dai & Zu‐Jun Ma, 2023. "Optimal joint trade‐in rebate strategies in a retailer‐led supply chain," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 399-415, January.
    3. Wang Lina & Milis Koen & Poelmans Stephan, 2021. "Study on Pollution Cost Control Model under Asymmetric Information Based on Principal Agent," Journal of Systems Science and Information, De Gruyter, vol. 9(5), pages 549-557, October.
    4. Zormpas, Dimitrios, 2020. "Investments under vertical relations and agency conflicts: A real options approach," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 273-287.
    5. Samuel N. Kirshner & Zhaolin Li, 2022. "Supply chain contracting with competing regretful retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2196-2211, September.
    6. Rufeng Wang & Siqi Wang & Shuli Yan, 2021. "Pricing and Coordination Strategies of Dual Channels Considering Consumers’ Channel Preferences," Sustainability, MDPI, vol. 13(20), pages 1-15, October.
    7. Qinpeng Wang & Longfei He, 2018. "Incentive Strategies for Low-Carbon Supply Chains with Asymmetric Information of Carbon Reduction Efficiency," IJERPH, MDPI, vol. 15(12), pages 1-18, December.

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