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Affiliation of Author(s):[1] School of Management, University of Electronic Science and Technology of China, 610054, China; [2] School of Economics and Management, Tsinghua University, 100084, China

Journal:Proceedings - ICSSSM'06: 2006 International Conference on Service Systems and Service Management

Key Words:Contracts - Costs - Information analysis - Mathematical models - Systems analysis

Abstract:This paper considers a screening mechanism which deals with information asymmetry of demand in launching a new private label product through a distribution channel where the retailer has private information on demand. An uninformed manufacturer proposes a lump sum payment contract, which a retailer either accepts or rejects. Rejection yields zero profits for both retailer and manufacturer. If the retailer accepts, the manufacturer sets a wholesale price to maximize her expected profit, and the retailer responses with an optimal retail price. Particularly, when the parameters satisfy certain conditions, there exists a unique separating equilibrium, which both firms make their optimal decisions. The uninformed manufacturer can use a lump sum transfer payment T as an instrument to screen the informed retailer's type on demand. It is shown whether the uninformed player can screen the informed player's type or not by designing a transfer payment contract, it ties in the player's market power within the distribution channel. ? 2006 IEEE.

Document Type:Conference article (CA)

Volume:1

Page Number:345-349

Translation or Not:no