Quantity Discount Scheme in Supply Chain under Asymmetric Information

IntroductionA quantity discount, which helps to save opera-tional cost, is offered from a supplier to retailers fororder size expansion. In traditional researches ofquantity discount, great attention has been devoted toits application, which means that th…

Quantity Discount Scheme in Supply Chain under Asymmetric Information

Quantity discount scheme plays an important role in supply chain management. The different quantity discount schemes under symmetric (full) information and asymmetric information, are analyzed by using principal-agent and optimal control theory. As a result, the research reveals that the optimal quantity discount solution under symmetric information is a special case of that under asymmetric information. At the same price, the critical value of quantity discount under asymmetric information is much lower than that under asymmetric information. Therefore, this leads to less cost for retailers and smaller profit for their supplier.