SONG Hua-ming, MA Yi-zhong. Product Quality Coordination in Outsourcing with Asymmetric Information[J]. International Journal of Plant Engineering and Management, 2014, 19(4): 207-211

Product Quality Coordination in Outsourcing with Asymmetric Information
SONG Hua-ming, MA Yi-zhong
Nanjing University of Science and Technology, Nanjing 210094, P.R.China
This paper investigates agency relationship composed by different risk preference between original equipment manufacturer( OEM) and contract manufacturer( CM). The quality level of contractor CM has a significant influence to market demand,and also influences mutual benefits. To improve the level of quality,contractor has to pay the cost price and the effort,which are not observed and private information,so in this agency relationship there may exist adverse selection and moral hazard. OEM designs menu-driven contractual mechanisms to encourage contractor. In this contractual mechanism,contractor takes initiative to reveal its own effort cost information and maximize mutual profits. This paper set up Stackerlberg game model dominated by OEM,then it gives contract parameters through solving the model and it also analyzes property of incentive contract.
Key words:    principal-agent theory    asymmetrical information    contract design    incentive mechanism   
Received: 2014-11-23     Revised:
DOI: 10.13434/j.cnki.1007-4546.2014.0403
Funds: This paper is supported by National Natural Science Fund(No.71172105)
Corresponding author:     Email:
Author description:
PDF(206KB) Free

[1] Corbett C J,Zhou D,Tang C S. Designingsupply contracts:contract type and informationasymmetry[J]. Management Science,2004, 50(4):550-559
[2] Ha A Y. Supplier-buyer contracting: asymmetriccost information and cutoff level policy for buyerparticipation [J]. Naval Research Logistics,2001, 48(1):41-64
[3] Iyer A V, Schwarz L B, Zenios S A. A principal-agent model for product specification andproduction[J]. Management Science,2005, 51(1):106-119
[4] Kaya M,zer . Quality risk in outsourcing:Noncontractible product quality and privatequality cost information[J]. Naval ResearchLogistics,2009, 56(7): 669-685
[5] Kostamis D,Duenyas I. Purchasing underasymmetric demand and cost information:When is more private information better[J].Operations Research,2011, 59(4):914-928
[6] Li C, Debo L G. Second sourcing vs. sole sourcingwith capacity investment and asymmetricinformation[J]. Manufacturing Service OperationsManagement, 2009, 11(3):448-470
[7] Zu X,Kaynak H. An agency theory perspectiveon supply chain quality management [J].International Journal of Operations & ProductionManagement, 2012, 32(4):423-446