We aim to design an appropriate sourcing mechanism with information asymmetry in a supply chain with one manufacturer and multiple suppliers subject to an emissions trading scheme. The manufacturer purchases raw materials from suppliers, who hold private information regarding the green degree-that is, the unit emission rates-of their raw materials. An appropriate strategy must be adopted by the manufacturer for the contract design, including a series of payments and the order quantities; the suppliers are subsequently invited to bid for the contracts. The basic model is formulated to assist the manufacturer in designing a reasonable contract for a single supplier. The characteristics of the optimal order quantity and payoff functions of both the manufacturer and supplier are analyzed. A competitive procurement scenario with multiple suppliers is also discussed. With respect to the diversity of auctions, three different auction types are analyzed, including a green degree auction, a price auction with emissions targets, and a performance-based auction. In addition, an efficient emissions trading policy is established to guide manufacturers regarding how to balance their emission allowances based † Corresponding author.
122Contract Design with Information Asymmetry on the optimal order quantities. Our approach provides an effective decision support system for both the manufacturer and suppliers. other journals. His research interests are in the areas of risk management in supply chains, strategic sourcing and buyer-supplier relationships, technology management, and performance evaluation. He serves as the Department Editor for IEEE Transactions in Engineering Management and Senior Editor for Decision Sciences Journal. He has more than 6,500 citations of his work and an h-index of 39.