Research on Markdown Money Contract with a Loss-Averse Supplier under the Asymmetric Information

Under the prospect theory and the principal-agent theory, this paper studies the markdown money contract under asymmetric information when the supply chain is composed of a risk neutral retailer and a loss-averse supplier. It studies the order behaviors of the retailer when the information of retailer’s sale cost is symmetric and asymmetric to the supplier respectively. It finds out within the markdown money contract that the supplier can know the true retailer’s sale cost through the order behavior choice of retailer and that the order quality under the condition when the information of retailer’s sale cost is say-metric to the supplier is lower than the optimized quality of the system. At last, a numerical simulation is done.