Coordinating corporate social responsibility in a two-level supply chain under bilateral information asymmetry

Overview & Synopsis

In this research, we study the problem of coordinating corporate social responsibility (CSR), an extremely important issue of supply chains in practice and academia, in a dyadic supply chain when a supplier and a manufacturer, two independent entities, commit CSR activities while both possess private CSR cost information i.e., bilateral information asymmetry. Decision structures and profits under information symmetry, information asymmetry-misreporting and asymmetry-estimation are modelled and investigated for each actor and the supply chain. The results show that in both information asymmetry scenarios, the supply chain profit decreases with respect to information symmetry, except for the exact estimate of the unknown cost. Hence, to deal with this inefficiency, we propose a coordination mechanism based on leader-leader Stackelberg models, rooted in the economic game. Finally, the numerical examples conducted in this paper seek to compare the results between the different decision models considered. The proposed coordination mechanism shows an improvement in global supply chain profit. Therefore, the main contribution of this study is to analyze the decisions under bilateral information asymmetry, rather than complete information or unilateral information asymmetry, where both actors are involved in CSR, rather than one or none and proposing appropriate coordinating mechanism. The proposed approach can be used by independent companies to coordinate their CSR efforts.