Supply chain informed principal model with quality uncertainty and information asymmetry in green supply chain

Abstract

In the green supply chain, due to factors such as technical level and capital investment, quality uncertainty often occurs. At the same time, manufacturers often know more about the uncertainty than the retailers they serve. To address the concerns raised above, we apply the informed principal model and consider a two-echelon green supply chain consisting of one unreliable manufacturer and one retailer. The manufacturer, as the principal, has private information about the green degree, while the retailer only knows its prior probability. We first study the underlying model under symmetric information. Then, under the information asymmetry, we construct a low-information-density model and an interim-efficient model. Finally, the numerical comparison results show that our propositions are valid. The results show that the low-information-density model can eliminate the information asymmetry, but it imposes high signaling cost on the high-quality manufacturer. The interim-efficient model can indeed reduce the cost and the distortion of the wholesale quantity. Moreover, it is worth mentioning that there is a specific threshold for the retailer's prior probability. When the prior probability is greater than this threshold, the interim-efficient model is better than the low–information-density model; otherwise, they are equivalent. Simultaneously, the higher the prior probability, the higher the manufacturer’s revenue. If the manufacturer wants to obtain more benefits, he must increase the retailer's trust by operating with integrity and building a brand effect.