Supply chain linear incentive contract with asymmetric information and moral hazard

In this paper, by the principal–agent theory, we study the game between supplier and retailer. We design the linear incentive contract in the circumstance of asymmetric information and moral hazard. In fact, the model is contructed as a stochastic bi-level programming problem for which the solution is the optimal policy of the supplier. Numerical experiments show the screening contract is better than the pooling contract for the supplier.