On efficiency of multistage channel with bargaining over wholesale prices

Abstract

This article considers a multistage channel with deterministic price‐sensitive demand. Two systems for pricing decisions, that is, the bargaining system and the leader‐follower system, are compared. We characterize the necessary and sufficient conditions on the power structure, under which the solution of the bargaining system Pareto dominates that of the leader‐follower system. Also, under such conditions, we give a tight upper bound of channel efficiency of the bargaining system, which converges to 100% channel efficiency as the number of stages increases to infinity. © 2016 Wiley Periodicals, Inc. Naval Research Logistics 63: 449–459, 2016

Supply chain coordination with product line design and a revenue sharing scheme

“…Similarly, Iyer and Villas‐Boas () provide a framework to study bargaining between supply chain members and shows that greater retailer power promotes supply chain coordination. Moreover, Zhong, Xie, Zhao, and Shen () study the bargaining system in a multistage channel with a price‐sensitive deterministic demand, and their finding indicates that downstream members with stronger relative bargaining power promote supply chain coordination, which echoes the finding of Iyer and Villas‐Boas (). However, the product line decision is absent in the studies of Iyer and Villas‐Boas () and Zhong et al ().…”

Bargaining in a multi-echelon supply chain with power structure: KS solution vs. Nash solution

“…The KS bargaining system. The configuration of our multi-echelon serial supply chain is similar to that in Li [13] and Zhong et al [26] ( Figure 2). There is only one member at each echelon, and the supply chain has n echelons in total.…”

“…The wholesale price contract is adopted between two neighboring supply chain members P i and P i−1 (i = n, n − 1..., 2). We assume that, the unit production cost of P n is [26,21,20]). In the KS bargaining system, P i and P i−1 (i = n, n − 1..., 2) adopt the generalized KS solution to negotiate the wholesale price p i with known p i+1 (define p n+1 = c for convenience).…”

“…After the wholesale price p i is negotiated, P i−1 determines his order quantities q i−1 . Similar to Zhong et al [26] (in which the generalized Nash solution is adopted), we assume the negotiations take place sequentially from the upstream to the downstream, and finally P 1 determines p 1 and q 1 based on the negotiated wholesale price p 2 . Further, we assume the production cost c, the demand function D(p 1 ) = (a + bp 1 ) d and the power structure {λ i } i=1,2,...,n are all common knowledge.…”

“…In specific, Nguyen studies the stationary equilibria, and characterizes the behavior of these stationary equilibria when the population of members at each echelon tends to infinity. Zhong et al [26] consider a multi-echelon serial supply chain with price sensitive demand. They adopt Nash solution to characterize the bargaining outcomes, and mainly discuss the supply chain performance when the length of the supply chain tends to infinity.…”