Price competition model in decentralized and centralized supply chains with demand disruption

Purpose: The paper studies the price competition of a supply chain with one supplier and two competing retailers under occasional demand disruption. Design/methodology/approach: The supply chain is either decentralized or centralized. The demand disruption for two retailers occurs with different probability. We analyze the effect of occurrence probability of demand disruption on the optimal prices of the supplier and two retailers. Findings: We find that the profits of supplier, retailers and supply chain are decreasing with the occurrence probability of demand disruption. Originality/value: It is helpful for supply chain members to adjust the original contracts to demand disruption.Peer Reviewe

Structure selection and coordination in dual-channel supply chains

Purpose: This paper investigates the influence of channel structures and channel coordination on the supplier, the retailer, and the entire supply chain in the context of two different kinds of marketing models: the common retailer and the exclusive shop. Design/methodology/approach: With suppliers who manufacture the alternative commodities and retailers in the dual-channel supply chains as the object of the research, this paper compares suppliers' profits, consumer utility without coordination and contrasts suppliers' and retailers' profits with coordination to determine the range of the revenue sharing rates and which parameters are related. Findings: The analysis suggests the preference lists of the supplier and the retailer over channel structures with and without coordination are different, and depend on parameters like channel basic demand, channel cost and channel substitutability. Originality/value: In this research, new sales model for two suppliers should choose the same retailer or the exclusive retailers to sell their commodities.Peer Reviewe

Structure selection and coordination in dual-channel supply chains

Purpose: This paper investigates the influence of channel structures and channel coordination on the supplier, the retailer, and the entire supply chain in the context of two different kinds of marketing models: the common retailer and the exclusive shop. Design/methodology/approach: With suppliers who manufacture the alternative commodities and retailers in the dual-channel supply chains as the object of the research, this paper compares suppliers' profits, consumer utility without coordination and contrasts suppliers' and retailers' profits with coordination to determine the range of the revenue sharing rates and which parameters are related. Findings: The analysis suggests the preference lists of the supplier and the retailer over channel structures with and without coordination are different, and depend on parameters like channel basic demand, channel cost and channel substitutability. Originality/value: In this research, new sales model for two suppliers should choose the same retailer or the exclusive retailers to sell their commodities.Peer Reviewe

Assessing the Profitability of Cooperative Advertising Programs in Competing Channels

Producción CientíficaA large literature studied the profitability (effectiveness) of cooperative advertising programs (CAPs) in distribution channels, but very few studies modeled pricing decisions in competitive markets under different channel structures. This paper fills this gap. We propose a game-theoretic model where two competing channels make pricing and promotional decisions. The efectiveness of CAPs is studied under different channel structures to examine how vertical and horizontal externalities can impact the effectiveness of CAPs. Each channel structure can be integrated or decentralized to account for different vertical interaction effects, resulting in three cases: (i) both channels are decentralized (DD), (ii) both are integrated (II), and (iii) a hybrid structure where one channel is decentralized and is competing with an integrated channel (DI). We solve six non-cooperative games: (1) both manufacturers offer CAPs under DD, (2) only one manufacturer offers a CAP under DD, (3) both manufacturers do not offer CAPs under DD, (4) the decentralized manufacturer offers a CAP under DI, (5) the decentralized manufacturer does not offer a CAP under DI, and (6) the channel problem under II. Then, we obtain and compare equilibrium profits and strategies across these games. The main results indicate that the profitability of CAPs depends on the levels of price competition and of the advertising effects. Also,while manufacturers benefit from CAPs, retailers may not find such programs profitable. Finally, the decentralized or integrated structure of the competing channel significantly impacts the effects of cooperative advertising. For example, CAPs can effectively coordinate the DD channel and even help it exceed profits earned by a vertically integrated channel. However, in the DI case, although CAPs can improve total channel profits, they do not fully coordinate the channel.1Research of the first and third authors is supported by the National Sciences and Engineering Council of Canada (NSERC). The second author’s research is partially supported by MEC under project ECO2014-52343-P, co-financed by FEDER funds and the COST Action IS1104 “The EU in the new economic complex geography: models, tools and policy evaluation"

Demand Management in Decentralized Logistics Systems and Supply Chains

We analyze issues arising from demand management in decentralized decision-making environments. We consider logistics systems and supply chains, where companies' operations are handled with independent entities whose decisions affect the performance of the overall system. In the first study, we focus on a logistics system in the sea cargo industry, where demand is booked by independent sales agents, and the agents' capacity limits and sales incentives are determined by a central headquarters. We develop models for the central headquarters to analyze and optimize capacity allocation and sales incentives to improve the performance of the decentralized system. We use network flow problems to incorporate agent behavior in our models, and we link these individual problems through an overall optimization problem that determines the capacity limits. We prove a worst-case bound on the decentralized system performance and show that the choice of sales incentive impacts the performance. In the second study, we focus on supply chains in the automotive industry, where decentralization occurs as a result of the non-direct sales channels of the auto manufacturers. Auto manufacturers can affect their demand through sales promotions. We use a game theoretical model to examine the impact of retailer incentive and customer rebate promotions on the manufacturer's pricing and the retailer's ordering/sales decisions. We consider several models with different demand characteristics and information asymmetry between the manufacturer and a price discriminating retailer. We characterize the subgame-perfect Nash equilibrium decisions and determine which promotion would benefit the manufacturer under which market conditions. We find that the retailer incentives are preferred when demand is known. On the other hand, when demand is highly uncertain the manufacturer is better off with customer rebates. We extend this research by analyzing a competitive setting with two manufacturers and two retailers, where the manufacturers' promotions vary between retailer incentives and customer rebates. We find an equilibrium outcome where customer rebates reduce the competitor's profits to zero. We observe in numerical examples that the manufacturers are able to increase their sales and profits with retailer incentives, although this can be at the expense of the retailers' profits under some situations.Ph.D.Committee Chair: Swann, Julie; Committee Member: Ergun, Ozlem; Committee Member: Ferguson, Mark; Committee Member: Griffin, Paul; Committee Member: Keskinocak, Pina

Operation decision of competitive mining supply chain based on social responsibility

The development of the green economy has significantly impact the traditional mining industry. Mining enterprises must invest in green technology to reduce the environmental pollution caused by flying dust and soil erosion and are subject to increased scrutiny to be socially responsible when conducting their business. To address this issue, we consider a competitive mining supply chain system consisting of two excavators and two exclusive retailers. Among them, the excavators have a certain sense of corporate social responsibility (CSR), that is, in addition to pursuing economic profits, they also consciously pay attention to the interests of consumers. We establish three different game models that two excavators exhibit no CSR behaviour (NN), two excavators exhibit CSR behaviour (SS) and one excavator exhibits CSR behaviour (SN). We examine the optimal decision-making strategies and analyse the impact of social responsibility. Analytical results show that the optimal strategies of mining supply chain are different under different supply chain structures. The optimal decisions of the mining supply chain members are the same in each case under the NN and SS models. In the SN model, the optimal decision strategy value of mining supply chain members is always greater than non-socially responsible supply chain members. In SS model, when the intensity of social responsibility competition is low, two excavators reduce the wholesale price, and retailers reduce the sales price; when the intensity of social responsibility competition is strong, two excavators will increase the wholesale price, and retailers will increase the sales price. These help to promote product sales and increase the profits of the supply chain system. In SN model, with the increase of social responsibility competition intensity, the wholesale price of two excavators and the sales price of retailers first increased and then decreased. Finally, numerical examples illustrated to justify the proposed model

The structure of equilibrium marketing channels: Common versus exclusive retailers

Coordination and control are critical aspects in the design of marketing channels due to the interdependence of various channel members and the complex flow of products, title to the products, payments and information. Important marketing decisions, such as prices and the level of promotional services, are often delegated to members of the marketing channel with divergent individual incentives. In this dissertation, I study equilibria in marketing channels in a differentiated product duopoly consisting of a single common retailer and two exclusive retailers. Interactions due to retail prices and the level of unobservable promotional effort provided by the retailer(s) contribute to interdependence of marketing decisions. Both exclusive retailers and common retailers will be observed in equilibrium marketing channels. If linear (one-part) wholesale prices are used in transactions between manufacturers and retailers, the argument that a common retailer is a device to implement collusive outcomes among manufacturers is questionable. The negative cross elasticity of competing products results in a higher markup by a common retailer than an exclusive retailer. The higher retail prices with a common retailer results in less intensive competition. Utilizing a common retailer has the beneficial effect of softening the competition among manufacturers. If the promotional services are predatory, the common retailer provides lower levels of promotional services than would exclusive retailers. This has a negative impact on manufacturers' profits. A common retailer will be utilized when the products are close substitutes, promotional services are not very predatory, and the provision of promotional services is not very costly.U of I OnlyETDs are only available to UIUC Users without author permissio