Supply chain coordination mechanisms under asymmetric information with retailer cost disruptions

A two-level supply chain model involving one supplier and one retailer with linear demand is developed, and supply chain coordination mechanisms under asymmetric information (the retailer's cost structure is asymmetric information) are proposed by employing game theory in two scenarios: Coordination mechanisms under asymmetric information in a regular scenario (without disruption); and coordination mechanisms under asymmetric information in an irregular scenario (with retailer cost disruptions). It is optimal for the supply chain to maintain the original production plan and to guarantee a steadily running system if variations of retailer costs are sufficiently low and do not exceed an upper bound. This shows that the original production plan has certain robustness under disruptions. Decisions must be re-made if a retailer's cost change is greater and exceeds an upper bound. Impacts of retailer cost disruptions on the order quantity, the retail price, the wholesale price and each party's as well as the system's expected profits are investigated through numerical analyses.