Analysis of a dual-sourcing service provision game with symmetric and asymmetric vendors

Hsieh, Chen-Chiung; Kuo, Pao Li

doi:10.1016/j.apm.2011.02.031

Cited by 7 publications

(9 citation statements)

References 35 publications

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“…It is worth noting that f 0 ðsÞ ¼ g 0 1 ðsÞ ¼ g 0 2 ðsÞ ¼ f . Bloom et al [17], Turcsik [5], Sudhir and Rao [41], Kuksov and Pazgal [42], Zhou and Li [34], Hsieh and Kuo [10] The main focus of this research is in channel coordination implications under such trade mechanisms as revenue sharing, consignment, and slowing allowance. To explore the effects of these mechanisms on channel performance, we begin by developing a base model of an integrated supply chain or a centralized channel with two variables p and s. Then we proceed to more general models consisting of four variables: the retail price p, number of shelf space s, revenue sharing percentage /, and slotting allowance f(s).…”

Section: The Problem Contextmentioning

confidence: 99%

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On channel coordination through revenue-sharing contracts with price and shelf-space dependent demand

Chen

Cheng

Chien

2011

Applied Mathematical Modelling

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a b s t r a c tThis paper deals with the problem of coordinating a vertically separated channel under a consignment contract with revenue sharing. We consider the demand of the downstream player, e.g., the retailer, being price and shelf-space sensitive. Under such a setting, the retailer decides on the revenue-sharing percentage and the slotting fee. And the upstream player, e.g., the manufacturer, decides on the retail price and the size of shelf-space. For each item sold, the retailer deducts an agreed-upon percentage from the selling price and remits the balance to the manufacturer. We model the decision-making of the two firms as a Stackelberg game, and carry out equilibrium analysis for both the centralized and decentralized regimes of the channel, with and without cooperation. In addition, a profit sharing scheme through a two-part slotting allowance is proposed, which leads to Pareto improvements among channel participants. Our analysis reveals that the noncooperative game tends to set a higher revenue-sharing percentage and lower slotting fee by the retailer, and a higher retail price and less display space by the manufacturer, which leads to a lower channel profit. The consistent bias can be perfectly rectified by the cooperative game through the proposed two-part contractual agreement.

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Section: The Problem Contextmentioning

confidence: 99%

“…Hsieh and Kuo [10] dealt with buyer-led service provision game with two vendors, and Foros et al [11] studied a downstream-led setting for a mobile network which is coordinated through a profit-sharing devise. However, the aforementioned literature does not consider the effect of shelf-space on customer's demand.…”

Section: Introductionmentioning

confidence: 99%

On channel coordination through revenue-sharing contracts with price and shelf-space dependent demand

Chen

Cheng

Chien

2011

Applied Mathematical Modelling

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“…Recently, many scholars investigated firm product quality-related sourcing decisions. Hsieh and Kuo [15] modelled a service provision game between two vendors under symmetric and asymmetric cost structures with the objective of winning the larger share of the buyer's fixed reward. Lee and Li [7] studied three different strategies that a buyer could use to manage supplier quality: cooperation, incentivisation, and inspection.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Although vertical quality cooperation and horizontal quality competition are commonly used as supplier quality improvement mechanisms, which strategy will be more suitable for quality aspects and/or manufacturer profit remains unclear. Specifically, most of the extant literature established a quality enhancement mechanism for single product sourcing [1,7,10,11,[13][14][15]. In many industries, however, manufacturers outsource the provisioning of a series of substitute products to external suppliers.…”

Section: Introductionmentioning

confidence: 99%

Sourcing for Quality: Cooperating with a Single Supplier or Developing Two Competing Suppliers?

Chen

2016

Mathematical Problems in Engineering

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Supplier efforts regarding product quality are an important issue in outsourcing and play a critical role in a manufacturer's choice of sourcing strategy. Consider a manufacturer that wants to outsource the manufacturing of two substitute products to external suppliers. This paper studies the strategic interactions under two sourcing strategies: single and dual sourcing. A fourstage noncooperative game model is established to describe each member's decisions. We further propose four decision scenarios: single sourcing with and without manufacturer quality investment sharing and dual sourcing when suppliers cooperate or do not cooperate on quality decisions. By the backward induction approach, we obtain analytical equilibrium solutions for each decision scenario. By comparing each pair of equilibrium profiles, we find that an appropriate proportion of quality investment sharing by the manufacturer can enable a cooperating strategy with a single supplier to be the dominant strategy. When the manufacturer does not want to share or does not want to share a relatively large portion of its supplier's quality investment, it will always prefer to develop two competing suppliers when the cost of dual sourcing is sufficiently low. However, dual sourcing can be extremely risky for the manufacturer because the suppliers could provide a relatively low product quality level by cooperating on the quality decision to extract the manufacturer's profit.

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“…Anton et al (2010) look at a static auction where the rationale for double sourcing is uncertainty about economies of scale. In both Klotz and Chatterjee (1995) and Hsieh and Kuo (2011), double sourcing can help finance entry costs. Klotz and Chatterjee (1995) also feature learning by doing.…”

Section: Introductionmentioning

confidence: 99%

Becoming the Neighbor Bidder: Endogenous Winner’s Curse in Dynamic Mechanisms

Francetich

2015

American Economic Journal: Microeconomics

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This paper addresses the problem of sequentially allocating time-sensitive goods, or one-period leases on a durable good, among agents who compete through time and learn about the common component of their valuation privately through experience. I show that efficiency is unattainable, and I identify simple variations of sequential second-price or English auctions that implement the second best and the revenue-maximizing auctions. When the units are divisible, I identify the corresponding auctions that allow for double sourcing. (JEL D44, D82)

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Analysis of a dual-sourcing service provision game with symmetric and asymmetric vendors

Cited by 7 publications

References 35 publications

On channel coordination through revenue-sharing contracts with price and shelf-space dependent demand

On channel coordination through revenue-sharing contracts with price and shelf-space dependent demand

Sourcing for Quality: Cooperating with a Single Supplier or Developing Two Competing Suppliers?

Becoming the Neighbor Bidder: Endogenous Winner’s Curse in Dynamic Mechanisms

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