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Impact of structure, market share and information asymmetry on supply contracts for a single supplier multiple buyer network

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  • Biswas, Indranil
  • Avittathur, Balram
  • Chatterjee, Ashis K

Abstract

Market share of buyers and the influence of supply chain structure on the choice of supply contracts have received scant attention in the literature. This paper focuses on this gap and examines a network consisting of one supplier and two buyers under complete and partial decentralization. In the completely decentralized setting both buyers are independent of the supplier. In the partially decentralized setting the supplier and one of the buyers form a vertically integrated entity. Both buyers order from the single supplier and produce similar products to sell in the same market. The supplier charges the buyer through a contract. We investigate the influence of supply chain structure, market-share and asymmetry of information on supplier's choice of contracts. We demonstrate that both linear two-part tariff and quantity discount contract can coordinate the supply chain irrespective of the supply chain structure. By comparing profit levels of supply chain agents across different supply chain structures, we show that if a buyer possesses a minimum threshold market potential, the supplier has an incentive to collude with her. We calculate the cut-off policies for wholesale price and two-part tariff contracts by incorporating the reservation profit level of individual agents. The managerial implications of the analyses and the directions of future research are presented in the conclusion.

Suggested Citation

  • Biswas, Indranil & Avittathur, Balram & Chatterjee, Ashis K, 2016. "Impact of structure, market share and information asymmetry on supply contracts for a single supplier multiple buyer network," European Journal of Operational Research, Elsevier, vol. 253(3), pages 593-601.
    • Handle: RePEc:eee:ejores:v:253:y:2016:i:3:p:593-601
    DOI: 10.1016/j.ejor.2016.03.014
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    Cited by:

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    2. Xin Yun & Hao Liu & Yi Li & Kin Keung Lai, 2023. "Contract design under asymmetric demand information for sustainable supply chain practices," Annals of Operations Research, Springer, vol. 324(1), pages 1429-1459, May.
    3. Matsui, Kenji, 2019. "A supply chain member should set its margin later if another member's cost is highly uncertain," European Journal of Operational Research, Elsevier, vol. 275(1), pages 127-138.
    4. Zhou, Jianheng & Zhao, Ruijuan & Wang, Weishen, 2019. "Pricing decision of a manufacturer in a dual-channel supply chain with asymmetric information," European Journal of Operational Research, Elsevier, vol. 278(3), pages 809-820.
    5. Varun Sharma & Alok Raj & Abhishek Chakraborty, 2023. "Analysis of power dynamics in sustainable supply chain under non-linear demand setup," Operations Management Research, Springer, vol. 16(1), pages 18-32, March.
    6. Wenbin Wang & Shuya Zhou & Meng Zhang & Hao Sun & Lingyun He, 2018. "A Closed-Loop Supply Chain with Competitive Dual Collection Channel under Asymmetric Information and Reward–Penalty Mechanism," Sustainability, MDPI, vol. 10(7), pages 1-31, June.
    7. Biswas, Indranil & Avittathur, Balram, 2019. "Channel coordination using options contract under simultaneous price and inventory competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 123(C), pages 45-60.
    8. Liu, Yong & Wang, Dong-dong & Xu, Qian, 2020. "A supply chain coordination mechanism with suppliers’ effort performance level and fairness concern," Journal of Retailing and Consumer Services, Elsevier, vol. 53(C).
    9. Kwon, Yong Woo & Sheu, Jiuh-Biing & Yoo, Seung Ho, 2022. "Quadratic quantity discount contract under price-dependent demand and consumer returns," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 164(C).
    10. Biswas, Indranil & Gupta, Rohit & Tiwari, Sunil & Talluri, Srinivas, 2023. "Multi-echelon supply chain coordination: Contract sequence and cut-off policies," International Journal of Production Economics, Elsevier, vol. 259(C).
    11. Biswas, Indranil & Raj, Alok & Srivastava, Samir K., 2018. "Supply chain channel coordination with triple bottom line approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 115(C), pages 213-226.
    12. Basu, Preetam & Avittathur, Balram, 2018. "Pricing and sourcing strategies for competing retailers in supply chains under disruption riskAuthor-Name: Kumar, Milan," European Journal of Operational Research, Elsevier, vol. 265(2), pages 533-543.
    13. Matsui, Kenji, 2018. "When and what wholesale and retail prices should be set in multi-channel supply chains?," European Journal of Operational Research, Elsevier, vol. 267(2), pages 540-554.
    14. Raj, Alok & Modak, Nikunja Mohan & Kelle, Peter & Singh, Bharati, 2021. "Analysis of a dyadic sustainable supply chain under asymmetric information," European Journal of Operational Research, Elsevier, vol. 289(2), pages 582-594.
    15. Suvadarshini, Pinakhi & Biswas, Indranil & Srivastava, Samir K., 2023. "Impact of reverse channel competition, individual rationality, and information asymmetry on multi-channel closed-loop supply chain design," International Journal of Production Economics, Elsevier, vol. 259(C).
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