Competition and Structure in Serial Supply Chains with Deterministic Demand

Corbett, Charles J.; Karmarkar, Uday S.

doi:10.1287/mnsc.47.7.966.9799

Cited by 239 publications

(154 citation statements)

References 17 publications

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“…Similarly, Corbett and Karmarkar (2001) model competition and entry into different levels of a multiple tier serial channel structure with a price-sensitive linear deterministic demand and find that price per unit, in a tier, falls with the number of entrants in any upstream tier, but is unchanged with the number of entrants in a downstream tier. Desai et al, (2004) discuss the role of the intermediary in the context of durable goods.…”

Section: Vertical Integration and Decentralizationmentioning

confidence: 99%

Pricing in Marketing Channels

Sudhir¹,

Datta²

2009

Handbook of Pricing Research in Marketing

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This paper provides a critical review of research on pricing within a channel environment. We first describe the literature in terms of increasing time horizons of decision making in a channel setting: (1) retail pass-through (2) pricing contracts and (3) channel design; all of which occur within a given market environment. We then describe the emerging empirical literature on structural econometric models of channels and its use in (1) inferring channel participant behavior and (2) policy simulations in a channel setting. We also discuss potential areas for future research in each area. Pricing in Marketing Channels"Price" and "Channel" are two of the four elements of the marketing mix that managers control, yet they differ fundamentally in how managers can use them to impact market demand.While price is the most flexible, in that managers can change it most easily to impact short-run demand, the distribution channel through which firms reach their end consumer is the least flexible and perhaps the costliest to change in the short run. Therefore, channel design is viewed as part of a firm's long run strategy. Most importantly, in the presence of a typically decentralized distribution channel, an upstream price change by a manufacturer does not affect consumer demand directly, but only through how this upstream price change affects the retail price set downstream in the channel.In his review of the pricing literature, Rao (1984) stated that "the issues of pricing along the distribution channel… have not received much attention in the literature." However, over the last 25 years, this gap has been remedied substantially. The tools of game theory have revolutionized the theoretical analysis of pricing within the channel and clarified the many issues about how prices are set within a channel; more importantly, these analyses have given insights on the optimal long-term channel strategy, given how prices will be set within the channel. A smaller but emerging empirical literature on structural models of channels has provided us insights on the behavior of channel participants and tools to perform policy analysis in a channel setting. The purpose of this article is to provide a critical review of this literature, identify the key themes of understanding that have emerged from research to-date and to identify important gaps in our knowledge that would benefit from future research.Given the short-run nature of price and the long-run nature of the channel, we organize the literature in terms of three key issues of managerial interest that progressively increase in their time horizons for the decision. The three sets of questions are:1. Conditional on the distribution channel (which is fixed in the short run) and other market characteristics, how can a change in upstream price affect the downstream price seen by the end consumer? This question of "pass-through" is the most short-term of the three sets of decisions we consider. Pass-through is of interest to an upstream manager because it determines the extent to w...

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Section: Vertical Integration and Decentralizationmentioning

confidence: 99%

Pricing in Marketing Channels

Sudhir¹,

Datta²

2009

Handbook of Pricing Research in Marketing

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“…The models presented in the above papers are limited in the number of supply chain entities and their coordination. Several researchers have presented competition models with the scope of multiple entities (Corbett and Karmarkar 2001;Nagurney and Toyasaki 2005). Corbett and Karmarkar (2001) develop a model that considers entry decisions and post-entry competition in multitier serial supply chains.…”

Section: Literature Reviewmentioning

confidence: 99%

“…For forward supply chain systems, the material flow volumes are usually assumed to be functions of all prices in the final market (Nicholson 2002;Corbett and Karmarkar 2001).…”

Section: Introductionmentioning

confidence: 99%

Decentralized decision-making and protocol design for recycled material flows

Hong

Ammons

Park

2008

International Journal of Production Economics

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Reverse logistics networks often consist of several tiers with independent members competing at each tier. This paper develops a methodology to examine the individual entity behavior in reverse production systems where every entity acts to maximize its own benefits. We consider two tiers in the network, collectors and processors. The collectors determine individual flow functions that relate the flow they provide each processor to the overall vector of prices that the processors determine. Because the exact final prices are unknown, each collector solves a robust optimization formulation where the prices paid by the processors are assumed to be within given ranges. The processors compete for the flow from the collectors until the Nash equilibrium is reached in this competitive tier, which sets the vector of prices to be offered to the collectors. To demonstrate the approach, a numerical example is given for a prototypical recycling network.Key words: decentralized decision-making; reverse production systems; the Nash Equilibrium IntroductionMaximizing the efficiency of recycled material flows is growing in urgency due to high demands in many raw material markets and the increasing concern for environmental impact of disposal.Supply chains are evolving from "open loop" unidirectional flows of materials, parts, and products from suppliers to end customers into more complex "closed loop" linked forward and reverse arcs (Fleischmann et al. 2000;Guide and Harrison 2003;Realff et al. 2004). Forward production systems are being expanded to incorporate reverse production systems (RPS) that include sorting, demanufacturing and/or refurbished processes in reverse logistics systems.Most of the research on RPS design views the system in a centralized way; the key assumption is that one planner has the requisite information about all the participating entities and seeks the optimal solution for the entire system (see Ammons et al. 2001;Shih 2001;Barros et al. 1998;Assavapokee et al. 2005). Wang et al. (2004) remark upon the three major drawbacks of centralized supply chain optimization models: (1) By ignoring the independence of the supply chain members, the competitive behavior between entities may lower the system 1 efficiency and hence a centralized model may not capture the appropriate bargaining mechanisms that can mitigate the competitive behavior; (2) The cost of information processing may be expensive and the central decision maker must gather all the information from every entity; and (3) The computation of solutions to centralized optimization models can be very challenging.Many emerging RPS structures consist of several independent entities where individual entrepreneurs have their own profit functions and often are unwilling to reveal their own information to each other or the public. This type of system behavior is decentralized. Often the decision variables for each entity in a decentralized system are also influenced by other entities' decisions, coupling prices between members of the same tier, and flows betw...

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“…: supply chain systems (e.g. Corbett and Karmarkar, 2001), divisional firms with production departments (or headquarters) as upstream and marketing departments (or profit centers) as downstream units (Zhao, 2000), network systems with providers of facilities as upstream and users as downstream units (Laffont et al, 1998a and1998b).…”

Section: Page 7 Of 22mentioning

confidence: 99%

“…Proof of theorem (6) It is easy to check that q m is solution of (15), for F m = (n − 1)P m /n 2 . For this particular value of the fixed cost F m ≤F , the full-cost pricing oligopoly replicates the standard monopoly case.…”

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confidence: 97%