Abstract: Because of asymmetric information and imperfect information,it is difficult for outsourcer to clarify the ability of the vendor which usually results in adverse selection. To solve such a problem,a model for analyzing the impacts of asymmetric information on vendor selection is proposed. Furthermore,the condition for market success is given based on the signal cost of vendor and the belief of outsourcer in this paper. At last,a case analysis is presented to demonstrate the feasibility and effectiveness of the model on management significance.

Key words: asymmetric information, adverse selection, game, vendor selection