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SCM Implementation Decisions of Principal-Agent under Asymmetric Information

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Document pages: 13 pages

Abstract: The optimization investment policy decision ofSCM-Supply Chain Management-implementation has been analysed under symmetricand asymmetric information conditions. For both conditions, SCM implementationoptions’ decision optimizing models have been developed. In these models, bothclients and vendors try to pursue their own benefits. Based upon theprincipal-agent theory, the models show to what extent a principal (a client)needs to pay more to an agent (a vendor) in a context of asymmetricinformation. For the client, it is important to understand the extra costs to beable to adopt effective strategies to stimulate a vendor toperform an optimal implementation of a SCM system. The results of a simulation experiment regardingSCM implementation options illustrate and verify the theoretical findings and confirm the general notion that the less informed party is obliged to payinformation rent to the better-informed party.

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