Quantity Discount Contract on the Supply Chain with Double Sided Moral Hazard: Model and Experiment

Huan ZHANG, Jian-Li JIANG, Xian-Yu WANG


In the two stage supply chain with one manufacturer and one retailer, the double sided moral hazard is considered as the sales influenced by both the manufacturer’s and the retailer’s effort. In theory, the quantity discount contract can motive the manufacturer and the retailer to put the optimal effort, and make the supply chain get the most earning, which can be divided arbitrarily. In experiment, the effort of the retailer and order quantity are influenced by the ratio of the earning divided, but the effort of the manufacturer is not sufficient, hardly influenced by the ratio of the ratio divided. Unlike the theory, the quantity discount contract can not make the supply chain’s earning optimal. The analysis of the causes of the manufacturer’s insufficient investment in three aspects, risk attitude, characteristics of the input and the allocation of decision rights, is given to provide guidance for the practice of the supply chain with double moral hazard.


Supply Chain Management, Double Sided Moral Hazard, Quantity Discount Contract, Game Theory, Economic Experiment.


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