Optimal contract of the manufacturer in closed loop supply chain under asymmetric information

Similar to open loop supply chain, due to asymmetric information, there is the moral hazard and incentive conflict in closed loop supply chains, which may lead to bad performance and decrease profit. To deal with this problem, in the context of a single-manufacturer and single-retailer closed loop supply chain, the game between manufacturer and retailer was studied from the point of principal-agency theory. Then the contracts with which the manufacturer can coordinate the system under symmetric and asymmetric information were analyzed respectively. It was concluded that the manufacturer can utilize a menu of contracts to screen the private information to avoid the moral hazard of the retailer and promote her own profit. Finally, the result was validated by numerical analysis.