Game-theoretic analysis of a two-echelon supply chain with option contract under fairness concerns

Sharma, Abhishek Kumar; Dwivedi, Gourav; Singh, Amol

doi:10.1016/j.cie.2019.106096

Cited by 51 publications

(29 citation statements)

References 60 publications

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“…In this paper, the superscript "∼" is introduced to represent the decision-making of two competing manufacturers when they induce equity concerns on an equal footing. e utility function of the manufacturer was assumed to be as follows [15]:…”

Section: Decentralized Decision-making When Competing Manufacturers Cmentioning

confidence: 99%

“…en, we put equations (14) and (15) into equations (10) and (11), and we get the optimal utility of the manufacturer and the optimal profit of the retailer when the manufacturers induce fairness concerns equivalently:…”

Section: Decentralized Decision-making When Competing Manufacturers Amentioning

confidence: 99%

“…On this basis, Zheng et al further researched the coordination of a closed-loop supply chain with fairness concerns [14]. Sharma et al investigated the fairness concerns of the channel members in a two-echelon supply chain composed of single supplier and single retailer, wherein the retailer procures products from the supplier using the option contract [15]. Wang studied the coordination of a two-echelon supply chain with bilateral information asymmetry and retailer risk aversion, and an effective compensation parameter for supply chain coordination was obtained [16].…”

Section: Introductionmentioning

confidence: 99%

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Coordination of Supply Chains with Competing Manufacturers considering Fairness Concerns

et al. 2020

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In this study, we examined the contract coordination between manufacturers with peer-induced and distributional fairness concerns. A revenue sharing contract was introduced to coordinate a competitive supply chain, in which the manufacturers have different fairness concerns based on centralized decision-making in terms of fairness neutrality. Then, we constructed two game models—the manufacturer’s peer-induced fairness concern model and the manufacturer’s distributional fairness concern model and analyzed the influence of a revenue sharing contract on the pricing decisions and profit distribution of a competitive supply chain considering fairness concerns. The results show that there is a revenue-sharing contract parameter in both the peer-induced and distributional fairness concerns of manufacturers, which can effectively realize Pareto improvements in a supply chain. Meanwhile, the retail and wholesale prices both decreased with the increase in the revenue-sharing ratio between retailers and manufacturers, and the profits of retailers decreased accordingly, but the overall utility of manufacturers and supply chains improved markedly. Moreover, the coordination condition is closely related to the level of fairness concerns of the manufacturers and the competition intensity between two manufacturers. The sharing contract designed in this study can not only effectively improve the utility of retailers and manufacturers but also enhance the total utility of the channel to ensure that node enterprises have long-term, stable, and cooperative relationships and to strengthen the overall competitiveness of the supply chain.

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Section: Decentralized Decision-making When Competing Manufacturers Cmentioning

confidence: 99%

Section: Decentralized Decision-making When Competing Manufacturers Amentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Coordination of Supply Chains with Competing Manufacturers considering Fairness Concerns

et al. 2020

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“…Fairness concern has been studied substantially in supply chain literature [10,[26][27][28][29][30][31][32]. Guan et al [26] studied the channel coordination under Nash bargaining fairness concerns.…”

Section: Fairness Concernmentioning

confidence: 99%

Contract Manufacturer’s Encroachment Strategy considering Fairness Concern in Supply Chain

Shi

2021

Mathematical Problems in Engineering

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More and more contract manufacturers have started to establish their own brands besides providing manufacturing service for retailers who operate exclusive well-known brands. This paper studies the encroachment strategy of a contract manufacturer in a supply chain and the impact of fairness concern. Four scenarios are investigated by building game models: no fairness concern, the retailer’s fairness concern, the contract manufacturer’s fairness concern, and both members’ fairness concern. The results show that when there is no fairness concern, the contract manufacturer always has motivation to encroach. However, when there exists fairness concern, only when the reservation price is sufficiently high, the contract manufacturer will encroach. Fairness concern has certain strength to stop the contract manufacturer’s encroachment. When the reservation price is sufficiently low, the encroachment of the contract manufacturer benefits the retailer, or else it will harm the benefit of the retailer. The effect of fairness concern on profit margin and wholesale price decisions is opposite under different encroachment strategies. However, the fairness concern has no impact on the retail price of the private brand. Under encroachment strategy, contract manufacturer’s or both members’ fairness concerns have positive effect on the retailer’s profit in certain conditions. However, the fairness concern always decreases the contract manufacturer’s profit no matter what the form it is. Numerical examples show that it is best for the supply chain that both members have fairness concern under no encroachment. However, when the contract manufacturer has a private brand, it is best for the supply chain that no one has fairness concern when the advantageous inequity concern parameter is sufficiently low. When the advantageous inequity concern parameter is sufficiently high, it is best for the supply chain that both members have fairness concern.

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“…Qin et al [26] studied the dynamic evolution of fair preference under the demand of exponential function and pointed out the retailer utility and supply chain utility are increasing with fairness in exponential demand. Sharma et al [27] developed a behavioral model of fairness in a two-echelon supply chain and found that the supply chain under the channel member's fairness concerns can be coordinated through option contract under certain conditions on the pricing parameters. Zheng et al [28] investigated the optimal decisions and profits of closed-loop supply chains giving the retailer's distributional fairness concerns and focused on how to allocate maximum profit in a centralized setting.…”

Section: Introductionmentioning

confidence: 99%

The Impacts of Fairness Concern and Different Business Objectives on the Complexity of Dual-Channel Value Chains

Zhang

Huang

2020

Complexity

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is paper considers a Stackelberg game model in a dual-channel supply chain, which is composed of a manufacturer and a retailer. e manufacturer and retailer consider fairness concern in the market competition, and the manufacturer takes market share and profit as his/her business objectives. e entropy complexity and dynamic characteristic of the dual-channel system are analyzed through mathematical analysis and numerical simulation, such as local stability, bifurcation, entropy, and chaos. e results show that, with the increase of price adjustment speed, the dual-channel supply chain is more complex and falls into a chaotic state in which system entropy increases; the stability of the dual-channel supply chain will be robust with the increase of weight of market share and weaken with the increase of the fairness concern level of the manufacturer and retailer. e high level of fairness concern of the manufacturer and retailer is always disadvantageous to the leading manufacturer but not always bad for the follower retailer. e performance of the dual-channel supply chain is improved with a high level of the manufacturer's fairness concern and reduced with a high level of the retailer's fairness concern. We also find the retailer will gain more profits in the chaotic state than the stable state in the Stackelberg game model. e variable feedback control method is applied to control the chaos of the dual-channel supply chain, and choosing appropriate control parameters can make the dual-channel supply chain system return to the stable state from the chaotic state, or delay the system to enter the bifurcation state. e research results can provide a guideline for enterprise decision-making.

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Game-theoretic analysis of a two-echelon supply chain with option contract under fairness concerns

Cited by 51 publications

References 60 publications

Coordination of Supply Chains with Competing Manufacturers considering Fairness Concerns

Coordination of Supply Chains with Competing Manufacturers considering Fairness Concerns

Contract Manufacturer’s Encroachment Strategy considering Fairness Concern in Supply Chain

The Impacts of Fairness Concern and Different Business Objectives on the Complexity of Dual-Channel Value Chains

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