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Trust‐based decisions in commission–agency relationships
Author(s) -
Fu Xiao,
Han Guanghua,
Wang Jiaxin
Publication year - 2019
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3027
Subject(s) - commission , agency (philosophy) , incentive , principal–agent problem , business , profit (economics) , microeconomics , order (exchange) , value (mathematics) , economics , computer science , finance , corporate governance , philosophy , epistemology , machine learning
In commission–agency case, an agent has an incentive to increase the recommended order quantity (ROQ) to maximize the expected profit. This study refers to a retailer's degree of dependence on the agent's ROQ as “trust.” We aim to formulate the agent and the retailer's decisions with trust‐based optimization models. To conduct the study, we first build the demand prediction and income model of the retailer and the agent with a trust‐updating model. Furthermore, we investigate the facts of the retailer's trust value by some experimental studies. Some managerial insights are thereby given and helpful to practice.