Two-part tariffs and threshold contracts can be used to counter double marginalization and increase agent effort in a supply chain.

Question

Quizplus · Accepted Answer

Two-part tariffs and threshold contracts provide incentives for agents to increase their effort and coordination in the supply chain, ultimately reducing the issue of double marginalization. Two-part tariffs involve charging a fixed fee and a variable fee based on the quantity purchased, while threshold contracts involve setting a minimum quantity to be purchased before a discounted price is offered. Both of these mechanisms can align the incentives of agents in the supply chain and increase efficiency.

Two-Part Tariffs and Threshold Contracts Can Be Used to Counter