Profit Margin Contract in a Dominant-Retailer Supply Chain under Asymmetric Information with Supplier´s Cost Disruptions

A supply chain model involving one supplier and one dominant retailer is developed. Profit margin contracts under asymmetric information are proposed with and without disruptions. Our research shows that the supply chain contract modeling has some kind of robustness, i.e., if variation of supplier´s cost is sufficiently small the supply chain would keep original production plan. Decisions must be re-made if supplier´s cost change is larger and exceeds an upper bound.