Dissertation > Economic > Trade and Economic > Domestic Trade and Economic > The circulation of commodities and the market > Goods acquisition

Research on the Incentives Mechanism of RSC Based on Moral Hazard

Author WangYiGuo
Tutor HuXinPing
School Chongqing University
Course Business management
Keywords Reverse supply chain Double moral hazard Multitask Incentive mechanism
CLC F713.2
Type Master's thesis
Year 2012
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With the rapid development of technology, products update accelerates. The numberof waste products has increased dramatically, and environment is polluted seriously, sorecycling waste product is very imperative. Manufacturers have to organize recycledwork actively to cut costs and raise profits, and recycling is a systemic engineering.Improving the quantity and quality of waste materials is the key to implement RSCeffectively. Considering information being asymmetric, the influence factors ofmanufacturers and retailers’ recycling act were analyzed, and how to design the incentivemechanism to procure the contribution higher effort level and guarantee the quality andquantity of recycling product was mainly discussed in the paper to reduce manufacturers’costs and improve profit.After introducing the theory of RSC and incentive mechanism under the agent theory,some domestic and foreign classic papers about RSC, moral hazard and multitasking weredescribed and some conclusions are drawn to lay the foundation for this paper.It was assumed that information is asymmetric in the process of the recycling, andthe incentive mechanism of recycling based on RSC was a focus in this paper. Firstly, abasic unilateral moral risk model is generated, and it was assumed that retailers have twotasks-improving the quality and quantity of recycling. The problem of performanceweakening that is caused by the substitutable relationship, is analyzed. In addition, anaudit mechanism is redesigned and a probability interval is determined to enhance theincentive efficiency effectively. The analysis illustrate that the maximum probability isproportional to the correlation coefficient, the minimum probability and manufacturerprofits is inversely proportional to the coefficient.A Principal-agent model is generated, in which double moral hazard exists. Theprofit changes and the impact of parameters on both parties income are analyzed, and theconclusion show that the ratio of effort level of manufacturer and retailer is equal to theratio of efforts efficiency, and so as marginal profit. Retailers’ fixed cost increases withthe efforts efficiency of manufacturers and efforts cost factor, but reduce with the outputcoefficient. Manufacturer can only make joint efforts to put efforts of both parties andnumber of waste materials to a level of sub-optimal, and the Pareto optimality can not be achieved. In practical work, this relationship should be considered fully to eliminate theimpact of moral hazard on the reverse supply chain and improve the overall performance.

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