Optimal decisions for a dual-channel supply chain under information asymmetry

Abstract

We discuss the optimal pricing and production decisions in a channel supply chain under symmetric and asymmetric information cases. We compare the optimum policies between the asymmetric information and the full information cases. We analyze the effect of the reseller's cost information on the profits of the partners. We find that information asymmetry is beneficial to the reseller, but is inefficient to the manufacturer and the whole supply chain. The information value increases with uncertainties arising from the reseller's cost structure. The dual-channel supply chain can share information and achieve coordination, if the lump-sum side payment from the manufacturer can make up the loss of the reseller due to sharing information. Finally, the effectiveness of the proposed models is verified by numerical examples.