Analysis of outsourcing pricing for fourth party logistics enterprise based on bilateral bargaining game with asymmetric information

The fourth party logistics(4PL) must outsource the logistic tasks after obtaining them from the manufacturer, therefore, we use bargaining game to analyze the outsourcing. In the bargaining game, 4PL and manufacturer´s earnings will not be zero when both sides can not reach an agreement. This is due to the fact that manufacturer will spend money to search, inspect and assess the new 4PL who can provide logistic service for him after that. And it will also cost 4PL some money to search for new customers. We call these costs cause by failure of the deal conversion costs. Using asymmetric information Bilateral bargaining game, we analyze the factors that affect the deal price and the dealing conditions between 4PL and manufacturer. Comparing the game with switching cost and without switching cost, we conclude that in the game without switching cost, manufacturer with a high degree of patience will get a smaller earning if a deal is concluded in the first phase. Once we take into account switching cost, manufacturer and 4PL get different earning in different domain.