Advertisement

Annals of Operations Research

, Volume 201, Issue 1, pp 17–38 | Cite as

Contracting with demand uncertainty under supply chain competition

  • Xingzheng Ai
  • Jing ChenEmail author
  • Jianhua Ma
Article

Abstract

We examine supply chain contracts for two competing supply chains selling a substitutable product, each consisting of one manufacturer and one retailer. Both manufacturers are Stackelberg leaders and the retailers are followers. Manufacturers in two competing supply chains may choose different contracts, either a wholesale price contract in which the retailer’s demand forecasting information is not shared, or a revenue-sharing contract in which the retailer’s demand forecasting information is shared. Under supply chain competition and demand uncertainty, we identify which contract is more advantageous for each supply chain, and under what circumstances.

Keywords

Demand uncertainty Supply chain competition Information sharing Revenue-sharing contract Wholesale price contract 

Notes

Acknowledgements

The authors gratefully acknowledge the support grants from the National Natural Science Foundation of China (NSFC), #70772070 and #70932005, and from the Natural Sciences and Engineering Research Council of Canada.

References

  1. Arshinder, K. A., & Deshmukh, S. G. (2008). Supply chain coordination: perspectives, empirical studies and research directions. Int J Prod Econ, 115, 316–335. CrossRefGoogle Scholar
  2. Atkins, D., & Zhao, X. (2003). Supply chain structure under price and service competition. Working paper. Sauder School of Business, University of British Columbia. Google Scholar
  3. Barnes, D. (2006). Competing supply chains are the future. Financial Times (November 8). Google Scholar
  4. Cachon, G. P. (2003). Handbooks in operations research and management science: supply chain management. In Supply chain coordination with contracts. Amsterdam: North-Holland. Google Scholar
  5. Cachon, G. P., & Lariviere, M. A. (2005). Supply chain coordination with revenue-sharing contracts: strengths and limitations. Manag Sci, 51, 30–44. CrossRefGoogle Scholar
  6. Chen, F. (2003). Information sharing and supply chain coordination. In A. G. de Kok & S. C. Graves (Eds.), Handbooks in operations research and management science (Vol. 11, pp. 341–421). Amsterdam: Elsevier. Google Scholar
  7. Corbett, J., & Tang, C. (1999). Designing supply contracts: contract type and information asymmetric. In S. Tayur, R. Ganeshan, & M. Magazine (Eds.), Quantitative models for supply chain management. Dordrecht: Kluwer. Google Scholar
  8. Coughlan, A. T. (1985). Competition and cooperation in marketing channel choice: theory and application. Mark Sci, 4, 110–129. CrossRefGoogle Scholar
  9. Gerchak, Y., & Wang, Y. (2004). Revenue-sharing vs. wholesale-price contracts in assembly systems with random demand. Prod Oper Manag, 1, 23–31. Google Scholar
  10. Giannoccaro, I., & Pontrandolfo, P. (2004). Supply chain coordination by revenue sharing contracts. Int J Prod Econ, 89, 131–139. CrossRefGoogle Scholar
  11. Giannoccaro, I., & Pontrandolfo, P. (2009). Negotiation of the revenue sharing contract: an agent-based systems approach. Int J Prod Econ, 122, 558–566. CrossRefGoogle Scholar
  12. Ha, A., & Tong, S. (2008). Contracting and information sharing under supply chain competition. Manag Sci, 4, 701–715. CrossRefGoogle Scholar
  13. James, D., Jr. (1999). Revenue-sharing, demand uncertainty, and vertical control of competitions. Working paper. Northwestern University, Kellogg Graduate School of Management. Google Scholar
  14. Lariviere, M. A. (2003). Supply chain contracting and coordination with stochastic demand. In S. Tayur, R. Ganeshan, & M. Magazine (Eds.), Quantitative models for supply chain management (pp. 233–268). Dordrecht: Kluwer. Google Scholar
  15. Lee, C. H., & Rhee, B. (2010). Coordination contracts in the presence of positive inventory financing costs. Int J Prod Econ, 124, 331–339. CrossRefGoogle Scholar
  16. Li, J., & Liu, L. (2006). Supply chain coordination with quantity discount policy. Int J Prod Econ, 101, 89–98. CrossRefGoogle Scholar
  17. McGuire, T., & Staelin, W. R. (1983). An industry equilibrium analysis of downstream vertical integration. Mark Sci, 2, 161–191. CrossRefGoogle Scholar
  18. Moorthy, K. S. (1988). Decentralization in channels. Mark Sci, 7, 335–355. CrossRefGoogle Scholar
  19. Pasternack, B. A. (1985). Optimal pricing and returns policies for perishable commodities. Mark Sci, 4, 166–176. CrossRefGoogle Scholar
  20. Raju, J., & Roy, A. (2000). Market information and firm performance. Manag Sci, 46, 1075–1084. CrossRefGoogle Scholar
  21. Ryu, S., Tsukishima, T., & Onari, H. (2009). A study on evaluation of demand information-sharing methods in supply chain. Int J Prod Econ, 120, 162–175. CrossRefGoogle Scholar
  22. Spengler, J. (1950). Vertical integration and antitrust policy. J Polit Econ, 50, 347–352. CrossRefGoogle Scholar
  23. Tsay, A. (1999). Quantity-flexibility contract and supplier-customer incentives. Manag Sci, 45, 1339–1358. CrossRefGoogle Scholar
  24. Tsay, A., Nahmias, S., & Agrawal, N. (2003). Modeling supply chain contracts: a review. In S. Tayur, R. Ganeshan, & M. Magazine (Eds.), Quantitative models for supply chain management (pp. 299–336). Dordrecht: Kluwer (Chap. 10). Google Scholar
  25. Vives, X. (1984). Duopoly information equilibrium: Cournot and Bertrand. J Econ Theory, 34, 71–94. CrossRefGoogle Scholar
  26. Wang, X., & Liu, L. (2007). Coordination in a retailer-led supply chain through option contract. Int J Prod Econ, 110, 115–127. CrossRefGoogle Scholar
  27. Wu, Q., & Chen, H. (2003). Chain-chain competition under demand uncertainty. Working paper. The University of British Columbia. Google Scholar
  28. Yao, D., Yue, X., & Wang, X. (2005). The impact of information sharing on a return policy with the addition of a direct channel. Int J Prod Econ, 97, 196–209. CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.School of Economics and ManagementUniversity of Electronic Science and Technology of ChinaChengduChina
  2. 2.Faculty of Business and EconomicsUniversity of WinnipegWinnipegCanada

Personalised recommendations