An Incentive Scheme for Choosing Third Party Logistics Providers

To choose third party logistics providers, lots of methods are developed, most of them focus on cost, time limit or quality uniquely, and none can take them all into consideration. This paper develops a game-theoretic model that studies the contract design problem. The model, in which the quality and cost of the providers are private information, involves a third party logistics buyer and many providers. By employing different coefficient to cost, time limit, quality and other related index, applying the revelation principle, the paper forwards the optimal contract. Furthermore, the contract includes the penalty for failure to comply with preset standards which is independent of the performance level. Under the preset game-theoretic model, the provider puts forward the scenario according to its own situations and decides the price rationally. At last, the paper proves that the proposed optimal contract is independent of the ex-ante beliefs which the service buyer has.