Abstract:

The principalagent relationship can be found between coreenterprise and its supplier. When the core enterprise owns more than one supplier running the same business, the influence among suppliers constrains the efficiency of the supply chain, the same problem can also be generated by asymmetric information, moral hazard and factors like those. Therefore, simply treating suppliers as a whole definitely, the most effective incentive mechanism can not be designed. Under the frame of rank-order tournaments, with the factors of interrelationship among suppliers taken into consideration, a model with one principal and three agents is analyzed. Because suppliers in different ranking have different influence over others, the weights of their interrelationship are also considered. Through the research, the rationality and effectiveness of incenting suppliers via classification and gradation are discussed.

Key words: rank-order tournaments, supply chain, incentive mechanism, principal-agent