Production strategy in supply chain under asymmetric information

Abstract

In this paper production strategies in supply chain under different information conditions, specially under asymmetry information, are discussed. Cost and profit function both of producer and stock keeper is developed, where producer is principal and stock-keeper is agent. Under asymmetry information the individual rationality constraint of producer's least profit is transformed into quadric form function, and through making the first order condition of stock-keeper's profit for the parameter of storage cost as state equation and applying maximal principle, production strategy with asymmetry information is deduced. The difference of production strategies under different information conditions is analyzed and simulation is done.