Supply Chain Intermediation

We will introduce an analytical model for each of cases listed above. The models help to characterize the role of intermediation, to determine when should they exist, and to understand how could they extract profit while sustaining the trade efficiency. For the incomplete information cases we need to make use of the mechanism design framework and the revelation principle which we will briefly summarize in the following section. In Section 3.3 we will summarize the settings of the four supply chain intermediation models. 

To carry out transactions at a lower cost, the intermediary must design an efficient mechanism that offers the service. We now introduce a mechanism design framework to characterize the main components of supply chain intermediation. Consider the base model of bilateral bargaining under incomplete information. There is a significant literature on strategic sequential bargaining models with incomplete information. Roth (1985) and Wilson (1987) provide excellent surveys of this literature. A subset of the literature is concerned about... 

In general, the intermediary ensures that mechanism T P p,w) is ex post efficient while balancing the budget (otherwise, the intermediary is to call off the trade). The above procedure offers a general mechanism design framework for supply chain intermediation. In the following section, we use this framework to consider a few different settings. 

We summarize four basic models for supply chain intermediation according to the taxonomy established earlier. The simplest model is the complete information case based on bilateral bargaining with complete information. This is followed by three incomplete information cases. Figure 3.1 illustrates the schematics for the four different models of supply chain intermediation. 

The above analysis provides the following insights concerning supply chain intermediation ... 

In the general framework of supply chain intermediation (Section 3.2), an intermediary can be characterized in a mechanism design fi mework using the revelation principle, requiring the specification of a direct revelation mecha-... 

Based on the supply chain intermediation framework outlined above, the intermediary devises a direct mechanism T P p,w) to maximize her profit (3.35), subject to incentive compatibility and individual rationality. First, the intermediary must determine P s, v) which specifies whether the trade is to take place given the reported s, v and her knowledge of their virtual opportunity costs and virtual willingness to pay. Given the simple form of the profit function (3.35) it is straightforward to find a profit maximizing P subject to individual rationality as follows ... 

Supply Chain Intermediation A Bargaining Theoretic Framework... 

Supply Chain Intermediation Supply Chain Intermediary Theory... 

Models of Supply Chain Intermediation Bilateral Bargaining with Complete Information... 

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