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Fuzzy principal-agent model for optimal supplier switching with asymmetric information

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Abstract

This paper studies a fuzzy principal-agent problem for supplier switching with taking into account the asymmetric information and the competition effect where the buying firm’s assessment to the entrant supplier’s cost is described as a fuzzy variable. The supplier switching model is set up to minimize the buying firm’s total procurement cost which includes the transfer payment to the entrant supplier, the payment to the incumbent supplier and the switching cost. Through the analysis of the participation constraint, the incentive compatibility constraint and the objective function, the equivalent model of the fuzzy principal-agent problem for supplier switching is proposed, and the optimal supplier switching strategy is obtained. It is shown that the competition effect would lead to a partial switching strategy. Additionally, the supplier switching decision under the symmetric information is also studied. Finally, an example is given to illustrate the effectiveness of the proposed model and the supplier switching strategy.

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Acknowledgments

This work was supported by Doctor Foundation of Hubei University of Automotive Technology No. BK201301 and the thousand people plan of Hubei Educational Department No. BK XD2012404.

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Authors and Affiliations

  1. Department of Mechanical Engineering, Hubei University of Automotive Technology, Shiyan, 442002, China

    Mingmao Hu

  2. College of Mathematics and Information Technology, Xingtai University, Xingtai, 054001, China

    Baoen Guo & Haitao Liu

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  1. Mingmao Hu
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  2. Baoen Guo
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  3. Haitao Liu
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Correspondence to Mingmao Hu.

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Hu, M., Guo, B. & Liu, H. Fuzzy principal-agent model for optimal supplier switching with asymmetric information. Int. J. Mach. Learn. & Cyber. 6, 7–15 (2015). https://doi.org/10.1007/s13042-014-0246-0

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