Enhancing corporate social responsibility: Contract design under information asymmetry |
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| Institution: | 1. School of Economics and Management, Nanjing University of Information Science and Technology, Nanjing 210044, PR China;2. Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, PA 15260, United States;3. School of Economics and Management, Southeast University, Nanjing 210096, PR China;1. Molde University College, P.O. Box 2110, 6402 Molde, Norway;2. University of Tromsø, P.O. Box 6050 Langnes, 9037 Tromsø, Norway;1. School of automation, Beijing University of Posts and Telecommunications, Beijing 100876, China;2. School of Economics and Management, Tsinghua University, Beijing 100084, China;1. School of Economics and Business Administration, Chongqing University, Chongqing, 400030, China;2. Chongqing Key Laboratory of Logistics, Chongqing University, Chongqing, 400030, China;3. Norwich Business School, University of East Anglia, Norwich, NR4 7TJ, UK;1. School of Industrial Engineering, Iran University of Science and Technology, Tehran, Iran;2. School of Industrial Engineering, College of Engineering, University of Tehran, Tehran, Iran |
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| Abstract: | We consider a two-stage supply chain in which a contract manufacturer (CM) sells products through a brand name retailer. The contract manufacturer can invest in corporate social responsibility (CSR) activities to improve customer perception about the firm and increase demand, while the retailer can influence the demand by exerting marketing efforts. We design optimal contracts for such a supply chain, which faces information asymmetry. The wholesale price contract was developed as the base model to derive insight into the value of information sharing. We examine the impact of CSR cost on CSR commitment and profits. We find that CM?s CSR cost impacts the CM?s and the retailer?s profits differently. Under certain conditions, the CM?s profit will increase with cost, while that of the retailer is uncertain. We also propose two-part tariff contracts for both the symmetric and asymmetric cases with the aim of maximizing the retailer?s profit and improving CM?s commitment to CSR. Finally, numerical experiments are conducted to illustrate and validate the proposed models and provide managerial insights. |
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| Keywords: | Supply chain management CSR efforts Marketing efforts Asymmetric information Game theory |
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