Reporter：Xiaohang Yue
Abstract：We develop an analytical model in which a supply chain can adopt either a conventional non-automated (long-term) contract or an automated contract in response to a potential demand shift. Under the automated contract, the wholesale prices are dynamically updated based on embedded Bayesian detection of the demand shift. We find that the magnitude and timing uncertainty of the demand shift are positive factors that favor the adoption of the automated contract in a supply chain. We also extend the model and explore the effect of supply chain competition on the adoption of automated contracts when two supply chains have Cournot competition.
