Research on the coordination of the manufacturer innovative investment at the two-tier supply chain


Sun Guoyan, Guo Yaohuang

Science Research Management ›› 2008, Vol. 29 ›› Issue (4) : 64-70.

PDF(1044 KB)
PDF(1044 KB)
Science Research Management ›› 2008, Vol. 29 ›› Issue (4) : 64-70.

Research on the coordination of the manufacturer innovative investment at the two-tier supply chain

  • Sun Guoyan, Guo Yaohuang
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Abstract

Contract incompleteness directly leads the manufacturer innovative investment to be hung up at the buyer-supplier relation. The parties can make up for this incompleteness to some extent by building into the contract a mechanism for revising the contract as each of them receives symmetric information. when a contract is being used to facilitate the trade between a supplier and a manufacturer who must undertake cost reducing investments, there is generally no possibility to implement the first-best for the supply chain because of hung up problem. Designing a coordinative mechanism, by which the parties can rescind the original contract and write a new one, can stimulate manufacturer to implement the first-best investment and derive an optimal initial contract. Finally, some more detail outcomes are derived from a special model and illustrated by an instance.

Key words

incomplete contract / renegotiation / cost reducing investment / coordination / hung up

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Sun Guoyan, Guo Yaohuang
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Research on the coordination of the manufacturer innovative investment at the two-tier supply chain[J]. Science Research Management. 2008, 29(4): 64-70
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