Showing papers by "Yanfei Lan published in 2014"

A fuzzy supply chain contract problem with pricing and warranty

Abstract: This paper analyzes a supply chain contract problem combining pricing with warranty under incomplete information, in which the supplier's product quality is usually unobservable and has a vagueness boundary to the buyer, it is reasonable to be characterized as a fuzzy variable. There are two important decisions of the buyer: the pricing decision and the warranty decision. Thus, a pricing and warranty contract model is developed with the purpose of maximizing the buyer's expected payoff under incentive feasible scheme. The analysis method is mainly decomposing the buyer's problem into an implementation problem and an optimization problem. The results demonstrate that, if purchasing quantity and product quality are complementary, the buyer's second-best purchasing quantity will be less than the first-best one; if substitutable, the opposite is true. Moreover, in order to demonstrate the superiority/novelty of the proposed model, two degenerated contracts, i.e., the pricing contract and the warranty contract are discussed, respectively, and the advantage of the combined pricing and warranty contract is also given. Finally, one numerical example is given to illustrate the applicability of the proposed model.

Optimal revenue-sharing contract based on forecasting effort for uncertain agency problem

Abstract: This paper discusses an optimal contracting problem between a principal and an agent by establishing an uncertain agency model. Compared with the existing work, this research focuses on the risk cost caused by the wrong investment in a task based on an inaccurate assessment about the potential output. To avoid it, the principal authorizes the professional agent to make a more accurate assessment about the output in the light of his professional knowledge and experience, and then to show the principal the optimal amount invested in the task. Meanwhile, as an incentive for the agent to pay great forecasting effort to make the more accurate assessment about the output, the principal provides the agent with a revenue-sharing contract including a sharing ratio for him. On this view, this paper proposes the optimal revenue-sharing contract that provides guidance for the two participators to make their respective optimal decisions. Furthermore, the proposed work is supported with the numerical results by analyzing the evolutions of the optimal contract under various influencing factors.

An uncertain wage contract model with adverse selection and moral hazard

Abstract: This paper considers a wage contract design problem faced by an employer (he) who employs an employee (she) to work for him in labor market. Since the employee's ability that affects the productivity is her private information and cannot be observed by the employer, it can be characterized as an uncertain variable. Moreover, the employee's effort is unobservable to the employer, and the employee can select her effort level to maximize her utility. Thus, an uncertain wage contract model with adverse selection and moral hazard is established to maximize the employer's expected profit. And the model analysis mainly focuses on the equivalent form of the proposed wage contract model and the optimal solution to this form. The optimal solution indicates that both the employee's effort level and the wage increase with the employee's ability. Lastly, a numerical example is given to illustrate the effectiveness of the proposed model.

Incentives for a Retailer with Two-Dimensional Asymmetric Information

Abstract: We study a two-tier supply chain where a manufacturer faces a retailer privileged with private information about both the forecast signal and its accuracy from contracting before and after the retailer's forecast two aspects. To better understand the impact of these two types of asymmetric information, four information structures are investigated: no asymmetric information, only forecast signal is asymmetric information, only forecast accuracy is asymmetric information and both forecast signal and its accuracy are asymmetric information. It demonstrates that for all these four cases, the optimal incentive schemes designed for the retailer take on a threshold structure of the unit production cost. Meanwhile, contrary to the intuition and previous findings, we find that the high precision level forecast is not always the manufacturer's preference, which rests not only with the observed signal, but also with the manufacturer's unit production cost and the retailer's cost-efficiency of making a high precision level forecast. And more importantly, it shows that more private information (two-dimensional asymmetric information or one asymmetric information) does not necessarily make the retailer better off or make the manufacturer worse off, which depends on the values of the parameters such as the retailer price, the demand level, the manufacturer's belief about the retailer's private information, etc. Besides, for the same asymmetric information, the values of information on the specific information may be different. Finally, the value of contracting sequence is explored. And it indicates that no matter what the information structure is, contracting after the retailer's forecast is always more attractive to the manufacturer, whereas contracting before the retailer's forecast is more attractive to the retailer.

Regulating a Firm under Adverse Selection and Moral Hazard in Uncertain Environment

Abstract: This paper investigates a problem of how to regulate a firm which has private information about the market capacity, leading to adverse selection, and which can increase the market demand by exerting costly effort, resulting in moral hazard. In such a setting, the regulator offers a regulatory policy to the firm with the objective of maximizing a weighted sum of the consumer surplus and the firm’s profit (i.e., the social total surplus). We firstly find that the regulator will set the firm’s effort level as zero under observable effort regardless of the market capacity being full or private information; that is, the effort has no impact on the optimal regulatory policy. Interestingly, we also show that, it is necessary for regulator to consider the difference between the effort’s impact on the demand and the price’s impact on the demand, which may generate different distortion effects about the regulatory policy.