publication . Article . 2015

Inequity aversion in a joint economic lot sizing environment with asymmetric holding cost information

Guido Voigt;
Open Access
  • Published: 01 Jan 2015 Journal: Journal of the Operational Research Society, volume 66, issue 4 April, pages 554-569
Abstract
Screening contracts (or ‘menu of contracts’) are frequently used for aligning the incentives in supply chains with private information. In this context, it is assumed that all supply chain parties are strictly (expected) profit-maximizing. However, previous empirical work shows that this is a critical assumption. In fact, it seems that inequity adverse subjects are willing to invest money for achieving higher relative payoffs. Interestingly, the classical approach to design incentive compatible mechanisms gives the agent cheap leeway to increase relative pecuniary payoffs and thereby achieving more equitable profit allocations, because the agent is left (almost)...
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