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Optimal Supply Chain Structural Choice under Horizontal Chain-to-Chain Competition

Author

Listed:
  • Yucai Wu

    (School of Economics and Management, Shanxi University, Taiyuan 030006, China)

  • Jiguang Wang

    (School of Economics and Management, Shanxi University, Taiyuan 030006, China)

  • Changhong Li

    (School of Economics and Management, Shanxi University, Taiyuan 030006, China)

  • Kan Su

    (School of Economics and Management, Shanxi University, Taiyuan 030006, China)

Abstract

This paper investigates the horizontal Nash game and structure selection strategy in two competing dominant enterprises. Each firm decides whether to outsource the retail or manufacture to the exclusive third-party enterprise and thus forms a decentralized supply chain structure. On the premise that third-party enterprises have no advantage on sales and manufacture cost, the revenue-sharing contract is introduced between the manufacturer and retailer, and the influence of decentralized structure on the game equilibrium structure and supply chain profit is analyzed based on Hotelling model. The results show that, when compared with centralized structure, decentralized supply chain has the structural advantage to improving not only its supply chain profits but also the competing chain. This interesting insight is counterintuitive to the common “double marginalization” effect and explains the outsourcing strategy from the perspective of supply chain competition. In addition, we find the dominant strategy in the evolutionary game is that both two chains are decentralized or integrated.

Suggested Citation

  • Yucai Wu & Jiguang Wang & Changhong Li & Kan Su, 2018. "Optimal Supply Chain Structural Choice under Horizontal Chain-to-Chain Competition," Sustainability, MDPI, vol. 10(5), pages 1-16, April.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:5:p:1330-:d:143180
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    References listed on IDEAS

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    Cited by:

    1. Hyun-Joon Jo & Timothy Connerton & Hyun-Jung Kim, 2019. "Dynamic Outsourcing Development for Sustainable Competitive Advantage in a High-Tech Backend Semiconductor Equipment Firm," Sustainability, MDPI, vol. 12(1), pages 1-13, December.
    2. Yucai Wu & Jiguang Wang & Changhong Li, 2019. "Decisions of Supply Chain Considering Chain-to-Chain Competition and Service Negative Spillover Effect," Sustainability, MDPI, vol. 11(6), pages 1-19, March.
    3. Bingbing Cao & Tianhui You & Chunyi Liu & Jian Zhao, 2021. "Pricing and Channel Coordination in Online-to-Offline Supply Chain Considering Corporate Environmental Responsibility and Lateral Inventory Transshipment," Mathematics, MDPI, vol. 9(20), pages 1-30, October.
    4. Yucai Wu & Jiguang Wang & Lu Chen, 2021. "Optimization and Decision of Supply Chain Considering Negative Spillover Effect and Service Competition," Sustainability, MDPI, vol. 13(4), pages 1-20, February.
    5. Hsun Chuan Cho & Ying Jiun Hsieh & Lan Ying Huang, 2018. "Capturing the Risk-Pooling Effect through Inventory Planning and Demand Switching," Sustainability, MDPI, vol. 10(11), pages 1-14, November.

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