Competition and Cooperation in Decentralized Push and Pull Assembly Systems

Abstract

In this paper, we study a decentralized assembly system consisting of a single assembler who buys complementary components from independent suppliers under two contracting schemes: push and pull. In both schemes, the component suppliers are allowed to freely form coalitions (or alliances) among themselves to better coordinate their pricing or production decisions. We show that the sole driver of the inefficiency in a push system, which is due to horizontal decentralization of suppliers, is the number of alliances that were formed. Specifically, it is shown that in a push system, the assembler's profit, the total profit of all suppliers and the consumers' surplus are all decreasing in the number of coalitions, and are thus maximized when the grand coalition is formed. We further carry out a stability analysis of coalition structures to verify to what extent suppliers can reduce or eliminate the inefficiency due to their decentralization by forming alliances. We show that in a push system with more than two suppliers and a power demand distribution, myopic suppliers would act independently, resulting with a least efficient channel, which makes all channel members, as well as the end consumers, worse off. On the other hand, we prove that farsighted suppliers would form the grand coalition and thus be able to completely eliminate the inefficiency stemming from their decentralization. Finally, it is shown that, in contrast to a push system, in a pull system the suppliers can easily coordinate their production quantities to eliminate the inefficiency due to their decentralization.alliance formation, newsvendor model, stable coalitions, push and pull models

Cooperative Evolutionary Game and Applications in Construction Supplier Tendency

“…Nevertheless, the issues, such as under what conditions the cooperation can be formed ("when-then" type scenarios), what the trajectory of the dynamic change is in the relationships between suppliers, and how the stability of the cooperative relationship between suppliers is, are also great concerns for both scholars and practitioners. Although the relevant research has emerged [37][38][39], the researches about these topics are rare, especially in construction industry.…”

Joint Selling of Complementary Components Under Brand and Retail Competition

“…Joint selling of complementary components has been studied recently in operations management; see, e.g., Granot and Yin (2008), Nagarajan and Bassok (2008), Sošić (2009), andYin (2010). However, these papers assume a monopolist supplier for each of these complementary components, which leads to a unique final product.…”

“…This stability concept is often interpreted as a necessary condition for network equilibrium and proves very useful in many applications such as social relationships, partnerships, and coauthorships (see, e.g., Jackson 2005, Ilkilic 2010). Pairwise stability has also been used in studying coalition formation games in operations management (see, e.g., Granot and Yin 2008, Nagarajan and Sošić 2008, Yin 2010, Fang and Cho 2014.…”

Stable Group Purchasing Organizations

“…Xue (1998) has refined Chwe's LCS by introducing the notion of perfect foresight. Some applications of analysis of stability using Chwe's LCS criterion include Nagarajan and Sošić (2007) and Granot and Yin (2004).…”