Supply chain coordination mechanism based on penalty and bonus under asymmetric information

Coordination mechanism between producer and supplier is studied under asymmetric information. Necessity of setting up coordination mechanism is analyzed by comparing supply chain decision under asymmetric information with supply chain decision under symmetric information. Then an incentive function based on penalty cost and bonus is introduced and a coordination mechanism is set up by the combined use of order quantity, bonus and penalty cost type of instrument. Focus is on the study of a coordination mechanism that allows a supply chain under asymmetric information to achieve the optimal performance through the producer's adjusting the penalty cost, and the bonus with the determined order quantity. Simulation calculation is done and simulation results under different information backgrounds are compared and analyzed at last.