Please use this identifier to cite or link to this item: https://doi.org/10.1016/S0377-2217(99)00210-6
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dc.titleLemons market? An incentive scheme to induce truth-telling in third party logistics providers
dc.contributor.authorLim, W.S.
dc.date.accessioned2013-10-10T04:37:38Z
dc.date.available2013-10-10T04:37:38Z
dc.date.issued2000
dc.identifier.citationLim, W.S. (2000). Lemons market? An incentive scheme to induce truth-telling in third party logistics providers. European Journal of Operational Research 125 (3) : 519-525. ScholarBank@NUS Repository. https://doi.org/10.1016/S0377-2217(99)00210-6
dc.identifier.issn03772217
dc.identifier.urihttp://scholarbank.nus.edu.sg/handle/10635/44917
dc.description.abstractIn this paper, we develop a game-theoretic model that studies the contract design problem of a third party logistics buyer when he is faced with a third party logistics provider and the quality of service and the cost of providing the service are private information to the latter. We apply the Revelation Principle to our analysis and characterise the optimal contract. We show that the contract offered to the service provider with low capability does not include any penalty for failure to comply to preset standards; neither does it include a gain-sharing scheme - the remuneration consists of an initial fixed payment which is independent of the level of performance. However, the contract offered to the service provider with high capability includes either a penalty scheme or a gain-sharing scheme. Furthermore, the more attractive the gain-sharing scheme (or alternatively, the more severe the penalty), the less the initial remuneration and vice versa. Finally, we prove that the proposed optimal contract is independent of the ex-ante beliefs which the service buyer has on the capability and the cost of the service provider.
dc.description.urihttp://libproxy1.nus.edu.sg/login?url=http://dx.doi.org/10.1016/S0377-2217(99)00210-6
dc.sourceScopus
dc.typeArticle
dc.contributor.departmentDECISION SCIENCES
dc.description.doi10.1016/S0377-2217(99)00210-6
dc.description.sourcetitleEuropean Journal of Operational Research
dc.description.volume125
dc.description.issue3
dc.description.page519-525
dc.description.codenEJORD
dc.identifier.isiut000088327600005
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