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Ordering, pricing and allocation in a service supply chain

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  • Wei, Yihua
  • Hu, Qiying
  • Xu, Chen

Abstract

In this paper, we study a two-stage game problem on pricing, ordering and allocation in a service supply chain, where one supplier sells a product with a fixed capacity to customers via two retailers under wholesale price contracts. The two retailers face random demands and order from the supplier. The supplier needs to allocate its capacity to retailers according to some allocation rule when its capacity cannot fit the retailers' order. We study two decentralized supply chains, where retail prices are determined by the supplier or the retailers. For each model, we derive and characterize the equilibrium by transforming the game problem into an optimization problem. We find that under the leader of the supplier the competition between the two retailers is eliminated and each retailer just orders its optimal quantity. So, the retailers' behavior in the game is not influenced by the supplier's allocation rule. Furthermore, with pricing power, the supplier can get higher profit but the retailers would not necessarily.

Suggested Citation

  • Wei, Yihua & Hu, Qiying & Xu, Chen, 2013. "Ordering, pricing and allocation in a service supply chain," International Journal of Production Economics, Elsevier, vol. 144(2), pages 590-598.
    • Handle: RePEc:eee:proeco:v:144:y:2013:i:2:p:590-598
    DOI: 10.1016/j.ijpe.2013.04.022
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    References listed on IDEAS

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    Cited by:

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    2. Weihua Liu & Donglei Zhu & Yijia Wang, 2017. "Capacity Procurement in Logistics Service Supply Chain with Demand Updating and Rational Expectation Behavior," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(06), pages 1-48, December.
    3. Ata Allah Taleizadeh & Mahsa Noori-daryan & Kannan Govindan, 2016. "Pricing and ordering decisions of two competing supply chains with different composite policies: a Stackelberg game-theoretic approach," International Journal of Production Research, Taylor & Francis Journals, vol. 54(9), pages 2807-2836, May.
    4. Wei, Yihua & Xu, Chen & Hu, Qiying, 2013. "Transformation of optimization problems in revenue management, queueing system, and supply chain management," International Journal of Production Economics, Elsevier, vol. 146(2), pages 588-597.
    5. Wang, Yulan & Wallace, Stein W. & Shen, Bin & Choi, Tsan-Ming, 2015. "Service supply chain management: A review of operational models," European Journal of Operational Research, Elsevier, vol. 247(3), pages 685-698.
    6. Weihua Liu & Enze Bai & Liwei Liu & Wanying Wei, 2017. "A Framework of Sustainable Service Supply Chain Management: A Literature Review and Research Agenda," Sustainability, MDPI, vol. 9(3), pages 1-25, March.
    7. Weihua Liu & Shuqing Wang & DongLei Zhu & Di Wang & Xinran Shen, 2018. "Order allocation of logistics service supply chain with fairness concern and demand updating: model analysis and empirical examination," Annals of Operations Research, Springer, vol. 268(1), pages 177-213, September.

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