Abstract: A study is conducted on a newsvendor supply chain composed of multi-suppliers and one assembler who also acts as retailer and possesses private demand information. The suppliers provide return policies to overcome information asymmetry so as to make the retailers order equal to the optimal order obtained by a supply chain with symmetric information. It is assumed that demands can be described by two states: high and low demand ones. Thus, the suppliers should offer two sub-contracts with respect to the two different demand states without knowing demand information, while the retailer should make order decision based on the actual demand state. Then, the optimal order is analyzed under both centralized and decentralized supply chain. Further, the game behavior between different suppliers is also analyzed for the setting of the wholesale price and buyback price. Numerical example shows that incentive is a reasonable way to make the retailer choose a subcontract based on actual demand state and the suppliers return polices can overcome the information asymmetry.

Key words: Newsvendor model, information asymmetry, supply chain coordination