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Supplier encroachment in competitive supply chains

Author

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  • Li, Tingting
  • Xie, Jinxing
  • Zhao, Xiaobo

Abstract

With the development of e-commerce, wholesale suppliers have opportunities to establish their own direct channels, competing with their retailing channels. It is often referred to as supplier encroachment. While many papers have analyzed encroachment of a monopolistic supplier, none of them study supplier encroachment in competitive supply chains. We first study the case with two non-identical supply chains, and then analyze the case with multiple identical supply chains. We show that, in both cases, the number of the encroaching suppliers in equilibrium decreases monotonically as the operational disadvantages of the suppliers become more significant. We find that there may exist the prisoner׳s dilemma phenomenon for the suppliers. Furthermore, encroachment may lead to the “lose–lose” outcome for the suppliers and the retailers. We also explore the efficiency of the suppliers, the retailers and the whole system under encroachment relative to the non-encroachment situation.

Suggested Citation

  • Li, Tingting & Xie, Jinxing & Zhao, Xiaobo, 2015. "Supplier encroachment in competitive supply chains," International Journal of Production Economics, Elsevier, vol. 165(C), pages 120-131.
  • Handle: RePEc:eee:proeco:v:165:y:2015:i:c:p:120-131
    DOI: 10.1016/j.ijpe.2015.03.023
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    References listed on IDEAS

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    Cited by:

    1. Ding, Qing & Dong, Ciwei & Pan, Zhicong, 2016. "A hierarchical pricing decision process on a dual-channel problem with one manufacturer and one retailer," International Journal of Production Economics, Elsevier, vol. 175(C), pages 197-212.
    2. Huang, Hu & Ke, Hua & Wang, Lei, 2016. "Equilibrium analysis of pricing competition and cooperation in supply chain with one common manufacturer and duopoly retailers," International Journal of Production Economics, Elsevier, vol. 178(C), pages 12-21.

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