Equilibrium analysis of distribution channel structures under power imbalance and asymmetric information

Abstract

This paper investigates the problem of channel choice game in two power-imbalanced supply chains consisting of the leader supply chain and the follower supply chain. We assume that there exists symmetric and asymmetric cost information between the two supply chains, and that the two chains as well as the two members in each chain follow the Stackelberg game setting. We analyse four competition scenarios: both chains are decentralised, where individual members of both supply chains maximise their own profits by independently selecting their price policies; both chains are integrated, where manufacturers and retailers coordinate their decisions to maximise supply chain profits; the leader chain is decentralised and the follower integrated; the leader is integrated and the follower decentralised. The primary objective of this paper is to investigate the influence of power imbalance, information asymmetries, and the degree of product substitutability under channel choice equilibrium. We find that, in contrast to earlier literature where all manufacturers share equal or balanced decision-making power, an integrated distribution channel is the dominant strategy for the leader under symmetric and asymmetric information Stackelberg game. As the degree of product substitutability increases, the follower will gradually switch from integrated distribution channel to decentralised distribution channel; the follower can gain from constructing a decentralised distribution channel as the prediction accuracy of the leader increases.

Dual channel closed-loop supply chain coordination with a reward-driven remanufacturing policy

“…Chen, Zhang, and Sun (2012) pointed out that many customers like to purchase products online to save transportation cost and time. As a result of these findings, the performances of the dual-channel supply chain under several constraints have evoked considerable interest from both the academic community and industry management (Yu, Zeng, and Zhao 2009;Jiang, Xu, and Sheng 2010;Khouja, Park, and Cai 2010;Li, Zhou, and Wang 2013;Lei et al 2014;Li et al 2014;Saha 2014;Xu et al 2014;Shang and Yang 2015;Zhao et al 2015). In this study, we explore the characteristics of dual channel CLSC members operating in cooperative and non-cooperative environments.…”

Role of power in supply chain performance: evidence from agribusiness SMEs in Uganda

“…Power imbalances usually arise due to differences in expertise, size, dependence, and the 23 nature of contract (Martin K Hingley, 2005;Belaya et al, 2009;Gellynck and Molnár, 2009; 24 Kühne et al, 2013;Li et al, 2013;Jones et al, 2014). In the context of agribusiness SMEs in Uganda, processors and wholesalers usually 1 have more resources (capital) and better access to market information as compared to their 2 suppliers and customers.…”

“…Power has been recognized as an important antecedent of SCP (Geyskens et al, 1999 another (Jonsson and Zineldin, 2003). Research indicates that there is always a power 20 imbalance amongst supply chain members due to the existences of large enterprises with 21 greater power than small ones (Cai et al, 2013;Li et al, 2013;Martin Hingley et al, 2015).…”

Pricing and introductory scarcity strategies based on consumers' response

“…For example, the literature has shown that high product substitutability will make the incumbent manufacturer of a product more inclined to develop indirect distribution channels for the product (Xia et al, 2013); when the degree of product substitutability is large, decentralized distribution channels will be chosen (Li et al, 2013). For example, the literature has shown that high product substitutability will make the incumbent manufacturer of a product more inclined to develop indirect distribution channels for the product (Xia et al, 2013); when the degree of product substitutability is large, decentralized distribution channels will be chosen (Li et al, 2013).…”

“…There is also literature that primarily focuses on the impact of product substitution on a firm's operational decisions, but such literature is outside the purview of this study. For example, the literature has shown that high product substitutability will make the incumbent manufacturer of a product more inclined to develop indirect distribution channels for the product (Xia et al, 2013); when the degree of product substitutability is large, decentralized distribution channels will be chosen (Li et al, 2013). Additionally, the impact of product substitutability on the value of information sharing for all the firms in a comprehensive supply chain can be variable (Ganesh et al, 2014).…”