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.