Coordination in Decentralised Models under Information Asymmetries Event

Event details

Decisions in business environments are usually competitive, because every participant is an independent entity having his own preferences, objectives, and information. Our main objective is to examine if different decision makers could coordinate their actions in a decentralised model under information asymmetries. We consider a supply chain, in which the parties determine their strategies under the objective to maximize solely their own utility functions. The parties are forced to interact with each other because no alternatives for external interaction are allowed. We assume that participants have private information, since independent entities tend to keep their cost structures or other internal information private. As the parties are the only ones that know their own information, no one can prevent them from lying about it. To reach coordination we design a mechanism as a screening device to induce the participants to reveal their private information. It is shown that if the mechanism includes appropriate incentives, parties will share honestly their information, because it is in their self interest. We examine different settings and it is proved that coordination could be attainable under information asymmetries, devising exact expressions for the optimal nodes’ strategies. Furthermore, we quantify the sustainable benefits that a potential coordination may bring in a decentralised model.