A vendor's procurement strategy under conditions of asymmetric information

This paper studies the procurement strategy between a vendor and a manufacturer when the unit cost of production of the manufacturer is unknown to the vendor. Under symmetric information conditions, the optimal solution of the objective function can be obtained by the maximum principle. Under asymmetric information conditions where the unit cost of production is hidden, we have established the vendor's optimal control model and obtained the analytic solution through the revelation principle. Finally, through a simulation experiment, it has been found that compared with the symmetric information conditions, the optimal order quantity decreases, the manufacturer's profit increases, and the vendor's profit decreases under conditions of asymmetric information.