Supply Chain Quality Control Strategy Under Condition of Moral Hazard

Abstract:

Based on principal-agent theory,this paper presents a study of the problem of quality control strategy in supply chain under the condition of moral hazard.We set up the expected revenue function of suppliers and buyers to design the qucontract in the following three cases such as the single moral hazard on the part of the supplier(quality prevention probability concealed) and the single moral hazard on the part of the buyer (quality inspection probability concealed),and double moral hazard (both quality prevention probability and quality inspection probability concealed).According to the optimization theory,the supplier’s and buyer’s moral hazard values were solved.A quantitative description of the information rents was presented and a simulation test was made.The simulation results show that when there is a single moral hazard on the part of the supplier,the buyer’s information rents and expected revenues will reduce,supplier’s expected revenues will increase; when there is a single moral hazard on the part of the buyer,the supplier’s information rents and expected revenues will reduce,buyer’s expected revenues will increase; when there is a double moral hazard,the information rents of supplier chain are the sum of supplier’s and buyer’s information rents in single moral hazard,the loss of the jointed expected revenues of the supply chain will be maximum.