Relational Supply Contracts
Subtitle: Optimal Concessions in Return Policies for Continuous Quality Improvements
By: by Michaela Isabel Höhn
Contributors: SpringerLink (Online service)
Series: Lecture Notes in Economics and Mathematical Systems -- 629
Publisher: Springer-Verlag Berlin Heidelberg; Springer
Published: 2010
Place of publication: Berlin, Heidelberg
Language: eng
Format: [electronic resource] :
Number of pages: 121
ISBN-13: 9783642027901; 9783642027918
Subjects: Mathematical Economics; Mathematical optimization; Economics; Industrial procurement
Description: Supply relations are often governed by so-called relational contracts. These are informal agreements sustained by the value of future cooperation. Although relational contracts persist in practice, research on these types of contract is only emerging in Operations and Supply Chain Management. This book studies a two-firm supply chain, where repeated transactions via well-established supply contracts and continued quality-improvement efforts are governed by a relational contract. We are able to characterize an optimal relational contract, i.e., to develop policies for supplier and buyer that structure investments in quality and flexibility in a way that no other self-enforcing contract generates higher expected joint surplus. A second goal is to compare the performance of different returns mechanisms in the context of relational contracting (quantity flexibility and buy-back contracts). Industry studies motivate the presented model.