Cost sharing and quality improvement incentives in the products recall considering the linear demand

LIU Xue-yong, XIONG Zhong-kai, XIONG Yu

Systems Engineering - Theory & Practice ›› 2012, Vol. 32 ›› Issue (7) : 1400-1407.

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Systems Engineering - Theory & Practice ›› 2012, Vol. 32 ›› Issue (7) : 1400-1407. DOI: 10.12011/1000-6788(2012)7-1400
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Cost sharing and quality improvement incentives in the products recall considering the linear demand

  • LIU Xue-yong1, XIONG Zhong-kai1, XIONG Yu2
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Abstract

This paper discusses the cost-sharing and quality-improvement incentives in the product recall. By introducing the root cause analysis cost-sharing contract, assumed that the manufacturer and supplier face the linear market demand, and all of the two firms could make the efforts improve product quality. The optimal Nash Equilibrium existence in the decentralized supply chain had been proved by using insights from supermodular game theory. Under the root cause analysis cost-sharing contract, the product quality, quality improvement efforts, retail price and wholesale price, product market share all obtained to first best level, their own profits had also been maximized. And in the case that the cost of root cause analysis can be ignored, the supply chain is coordinated.

Key words

products recall / quality improvement incentives / supermodular game / decision optimization

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LIU Xue-yong , XIONG Zhong-kai , XIONG Yu. Cost sharing and quality improvement incentives in the products recall considering the linear demand. Systems Engineering - Theory & Practice, 2012, 32(7): 1400-1407 https://doi.org/10.12011/1000-6788(2012)7-1400

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