IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v130y2019icp293-311.html
   My bibliography  Save this article

Service order allocation under uncertain demand: Risk aversion, peer competition, and relationship strength

Author

Listed:
  • Wang, Di
  • Liu, Weihua
  • Shen, Xinran
  • Wei, Wanying

Abstract

This paper discusses the order allocation in service supply chains under uncertain demand, and builds a Stackelberg game model composed of a service integrator (SI), a key service supplier (SP), and an ordinary SP. The individual impacts of risk aversion, peer competition, and relationship strength, and their interaction impacts are studied. There is an offset effect between risk aversion and relationship strength and an amplification effect between peer competition and relationship strength. Only if three factors meet the equilibrium effect, can SI achieve higher expected utility. The “incentive upgrade and cost sharing” contract is proposed to improve SI’s optimal expected utility.

Suggested Citation

  • Wang, Di & Liu, Weihua & Shen, Xinran & Wei, Wanying, 2019. "Service order allocation under uncertain demand: Risk aversion, peer competition, and relationship strength," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 130(C), pages 293-311.
    • Handle: RePEc:eee:transe:v:130:y:2019:i:c:p:293-311
    DOI: 10.1016/j.tre.2019.09.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554519303679
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tre.2019.09.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hu, Benyong & Feng, Yi, 2017. "Optimization and coordination of supply chain with revenue sharing contracts and service requirement under supply and demand uncertainty," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 185-193.
    2. Yannan Jin & Qiying Hu & Sang Won Kim & Sean X. Zhou, 2019. "Supplier Development and Integration in Competitive Supply Chains," Production and Operations Management, Production and Operations Management Society, vol. 28(5), pages 1256-1271, May.
    3. Lin Tian & Asoo J. Vakharia & Yinliang (Ricky) Tan & Yifan Xu, 2018. "Marketplace, Reseller, or Hybrid: Strategic Analysis of an Emerging E‐Commerce Model," Production and Operations Management, Production and Operations Management Society, vol. 27(8), pages 1595-1610, August.
    4. Li, Jian & Wang, Shouyang & Cheng, T.C.E., 2010. "Competition and cooperation in a single-retailer two-supplier supply chain with supply disruption," International Journal of Production Economics, Elsevier, vol. 124(1), pages 137-150, March.
    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. Ma, Peng & Wang, Haiyan & Shang, Jennifer, 2013. "Contract design for two-stage supply chain coordination: Integrating manufacturer-quality and retailer-marketing efforts," International Journal of Production Economics, Elsevier, vol. 146(2), pages 745-755.
    7. Cai, Jianhu & Hu, Xiaoqing & Tadikamalla, Pandu R. & Shang, Jennifer, 2017. "Flexible contract design for VMI supply chain with service-sensitive demand: Revenue-sharing and supplier subsidy," European Journal of Operational Research, Elsevier, vol. 261(1), pages 143-153.
    8. Niu, Baozhuang & Wang, Yulan & Guo, Pengfei, 2015. "Equilibrium pricing sequence in a co-opetitive supply chain with the ODM as a downstream rival of its OEM," Omega, Elsevier, vol. 57(PB), pages 249-270.
    9. Ding, Yi & Gao, Xing & Huang, Chao & Shu, Jia & Yang, Donghui, 2018. "Service competition in an online duopoly market," Omega, Elsevier, vol. 77(C), pages 58-72.
    10. Chun-Hung Chiu & Tsan-Ming Choi, 2016. "Supply chain risk analysis with mean-variance models: a technical review," Annals of Operations Research, Springer, vol. 240(2), pages 489-507, May.
    11. Li, Bo & Jiang, Yushan, 2019. "Impacts of returns policy under supplier encroachment with risk-averse retailer," Journal of Retailing and Consumer Services, Elsevier, vol. 47(C), pages 104-115.
    12. Yong Zha & Jiahong Zhang & Xiaohang Yue & Zhongsheng Hua, 2015. "Service supply chain coordination with platform effort-induced demand," Annals of Operations Research, Springer, vol. 235(1), pages 785-806, December.
    13. Xiang Li & Yongjian Li, 2016. "Optimal service contract under cost information symmetry/asymmetry," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 269-279, February.
    14. Xiao, Tiaojun & Xu, Tiantian, 2014. "Pricing and product line strategy in a supply chain with risk-averse players," International Journal of Production Economics, Elsevier, vol. 156(C), pages 305-315.
    15. Anupam Agrawal & Shantanu Bhattacharya & Sameer Hasija, 2016. "Cost-Reducing Innovation and the Role of Patent Intermediaries in Increasing Market Efficiency," Production and Operations Management, Production and Operations Management Society, vol. 25(2), pages 173-191, February.
    16. Yun Zhou & Lei Zhao & Xiaobo Zhao & Jianhua Jiang, 2011. "A supplier selection and order allocation problem with stochastic demands," International Journal of Systems Science, Taylor & Francis Journals, vol. 42(8), pages 1323-1338.
    17. Kay-Yut Chen & Murat Kaya & Özalp Özer, 2008. "Dual Sales Channel Management with Service Competition," Manufacturing & Service Operations Management, INFORMS, vol. 10(4), pages 654-675, June.
    18. Tsan-Ming Choi & T. C. E. Cheng & Xiande Zhao & Xiang Li & Yongjian Li & Xiaoqiang Cai & Jun Shan, 2016. "Service Channel Choice for Supply Chain: Who is Better Off by Undertaking the Service?," Production and Operations Management, Production and Operations Management Society, vol. 25(3), pages 516-534, March.
    19. Guo Li & Hui Mao & Lei Xiao, 2017. "Impacts of Leader–Follower Structure on Pricing and Production Strategies in a Decentralized Assembly System," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(01), pages 1-24, February.
    20. Ziping Wang & Dong‐Qing Yao & Xiaohang Yue & John J. Liu, 2018. "Impact of IT Capability on the Performance of Port Operation," Production and Operations Management, Production and Operations Management Society, vol. 27(11), pages 1996-2009, November.
    21. Oh, Sechan & Rhodes, James & Strong, Ray, 2016. "Impact of cost uncertainty on pricing decisions under risk aversion," European Journal of Operational Research, Elsevier, vol. 253(1), pages 144-153.
    22. Karray, Salma, 2013. "Periodicity of pricing and marketing efforts in a distribution channel," European Journal of Operational Research, Elsevier, vol. 228(3), pages 635-647.
    23. Bin Dan & Shuguang Zhang & Maosen Zhou, 2018. "Strategies for warranty service in a dual-channel supply chain with value-added service competition," International Journal of Production Research, Taylor & Francis Journals, vol. 56(17), pages 5677-5699, September.
    24. Qian Liu & Dan Zhang, 2013. "Dynamic Pricing Competition with Strategic Customers Under Vertical Product Differentiation," Management Science, INFORMS, vol. 59(1), pages 84-101, August.
    25. Hsiao†Hui Lee & Cuihong Li, 2018. "Supplier Quality Management: Investment, Inspection, and Incentives," Production and Operations Management, Production and Operations Management Society, vol. 27(2), pages 304-322, February.
    26. Liu, Weihua & Wang, Di & Shen, Xinran & Yan, Xiaoyu & Wei, Wanying, 2018. "The impacts of distributional and peer-induced fairness concerns on the decision-making of order allocation in logistics service supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 116(C), pages 102-122.
    27. Mafakheri, Fereshteh & Breton, Michele & Ghoniem, Ahmed, 2011. "Supplier selection-order allocation: A two-stage multiple criteria dynamic programming approach," International Journal of Production Economics, Elsevier, vol. 132(1), pages 52-57, July.
    28. Yefen Chen & Xiaobo Zhao, 2015. "Decision Bias in Capacity Allocation Games with Uncertain Demand," Production and Operations Management, Production and Operations Management Society, vol. 24(4), pages 634-646, April.
    29. Yuen, Andrew Chi-lok & Zhang, Anming & Cheung, Waiman, 2013. "Foreign participation and competition: A way to improve the container port efficiency in China?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 220-231.
    30. Zhou, Yong-Wu & Guo, Jinsen & Zhou, Wenhui, 2018. "Pricing/service strategies for a dual-channel supply chain with free riding and service-cost sharing," International Journal of Production Economics, Elsevier, vol. 196(C), pages 198-210.
    31. Tsan-Ming Choi & Stein W Wallace & Yulan Wang, 2016. "Risk management and coordination in service supply chains: information, logistics and outsourcing," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 159-164, February.
    32. Wu, Desheng Dash & Zhang, Yidong & Wu, Dexiang & Olson, David L., 2010. "Fuzzy multi-objective programming for supplier selection and risk modeling: A possibility approach," European Journal of Operational Research, Elsevier, vol. 200(3), pages 774-787, February.
    33. Cui, Qinquan & Chiu, Chun-Hung & Dai, Xin & Li, Zhongfei, 2016. "Store brand introduction in a two-echelon logistics system with a risk-averse retailer," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 90(C), pages 69-89.
    34. Choi, Tsan-Ming & Wen, Xin & Sun, Xuting & Chung, Sai-Ho, 2019. "The mean-variance approach for global supply chain risk analysis with air logistics in the blockchain technology era," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 127(C), pages 178-191.
    35. Sripad K. Devalkar & Harish Krishnan, 2019. "The Impact of Working Capital Financing Costs on the Efficiency of Trade Credit," Production and Operations Management, Production and Operations Management Society, vol. 28(4), pages 878-889, April.
    36. Zheng, Wei & Li, Bo & Song, Dong-Ping, 2017. "Effects of risk-aversion on competing shipping lines’ pricing strategies with uncertain demands," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 337-356.
    37. Chun‐Hung Chiu & Tsan‐Ming Choi & Xin Dai & Bin Shen & Jin‐Hui Zheng, 2018. "Optimal Advertising Budget Allocation in Luxury Fashion Markets with Social Influences: A Mean‐Variance Analysis," Production and Operations Management, Production and Operations Management Society, vol. 27(8), pages 1611-1629, August.
    38. Choi, Tsan-Ming & Ma, Cheng & Shen, Bin & Sun, Qi, 2019. "Optimal pricing in mass customization supply chains with risk-averse agents and retail competition," Omega, Elsevier, vol. 88(C), pages 150-161.
    39. Demirtas, Ezgi Aktar & Üstün, Özden, 2008. "An integrated multiobjective decision making process for supplier selection and order allocation," Omega, Elsevier, vol. 36(1), pages 76-90, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Wei & Feng, Lipan & Li, Yongjian & Xu, Fangchao & Deng, Qianzhou, 2020. "Role of financial leasing in a capital-constrained service supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 143(C).
    2. Yu, Yunlong & Xiao, Tiaojun, 2021. "Analysis of cold-chain service outsourcing modes in a fresh agri-product supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 148(C).
    3. Zheng, Wei & Li, Bo & Song, Dongping & Li, Yanran, 2023. "Innovative development strategy of a risk-averse firm considering product unreliability under competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 172(C).
    4. Choi, Tsan-Ming, 2020. "Innovative “Bring-Service-Near-Your-Home” operations under Corona-Virus (COVID-19/SARS-CoV-2) outbreak: Can logistics become the Messiah?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 140(C).
    5. Shi, Jia & Li, Qiang & Chu, Lap Keung & Shi, Yuan, 2021. "Effects of demand uncertainty reduction on the selection of financing approach in a capital-constrained supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 148(C).
    6. Zhang, Qiao & Chen, Jing & Lin, Jun, 2022. "Market targeting with social influences and risk aversion in a co-branding alliance," European Journal of Operational Research, Elsevier, vol. 297(1), pages 301-318.
    7. Wei, Wanying & Liu, Weihua & Tang, Ou & Dong, Chuanwen & Liang, Yanjie, 2023. "CSR investment for a two-sided platform: Network externality and risk aversion," European Journal of Operational Research, Elsevier, vol. 307(2), pages 694-712.
    8. Jia, Xiaohui & Zhang, Donghui, 2021. "Prediction of maritime logistics service risks applying soft set based association rule: An early warning model," Reliability Engineering and System Safety, Elsevier, vol. 207(C).
    9. Zhai, Yue & Hua, Guowei & Cheng, Meng & Cheng, T.C.E., 2023. "Production lead-time hedging and order allocation in an MTO supply chain," European Journal of Operational Research, Elsevier, vol. 311(3), pages 887-905.
    10. Di Wang & Weihua Liu & Yanjie Liang & Shuang Wei, 2023. "Decision optimization in service supply chain: the impact of demand and supply-driven data value and altruistic behavior," Annals of Operations Research, Springer, vol. 324(1), pages 971-992, May.
    11. Yu, Shiqiang & Guo, Chunxiang, 2024. "Service design under asymmetric service provider competition: Applications of AI services," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 182(C).
    12. Liu, Weihua & Liang, Yanjie & Tang, Ou & Shi, Victor & Liu, Xinyun, 2021. "Cooperate or not? Strategic analysis of platform interactions considering market power and precision marketing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 154(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shen, Bin & Xu, Xiaoyan & Guo, Shu, 2019. "The impacts of logistics services on short life cycle products in a global supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 131(C), pages 153-167.
    2. Xu, Xiaoping & Zhang, Mian & He, Ping, 2020. "Coordination of a supply chain with online platform considering delivery time decision," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    3. Choi, Tsan-Ming & Chung, Sai-Ho & Zhuo, Xiaopo, 2020. "Pricing with risk sensitive competing container shipping lines: Will risk seeking do more good than harm?," Transportation Research Part B: Methodological, Elsevier, vol. 133(C), pages 210-229.
    4. Wei, Wanying & Liu, Weihua & Tang, Ou & Dong, Chuanwen & Liang, Yanjie, 2023. "CSR investment for a two-sided platform: Network externality and risk aversion," European Journal of Operational Research, Elsevier, vol. 307(2), pages 694-712.
    5. Lou, Yaqi & Feng, Lipan & He, Shuguang & He, Zhen & Zhao, Xiukun, 2020. "Logistics service outsourcing choices in a retailer-led supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    6. Di Wang & Weihua Liu & Yanjie Liang & Shuang Wei, 2023. "Decision optimization in service supply chain: the impact of demand and supply-driven data value and altruistic behavior," Annals of Operations Research, Springer, vol. 324(1), pages 971-992, May.
    7. Liu, Weihua & Wang, Di & Shen, Xinran & Yan, Xiaoyu & Wei, Wanying, 2018. "The impacts of distributional and peer-induced fairness concerns on the decision-making of order allocation in logistics service supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 116(C), pages 102-122.
    8. Wen, Xin & Choi, Tsan-Ming & Chung, Sai-Ho, 2019. "Fashion retail supply chain management: A review of operational models," International Journal of Production Economics, Elsevier, vol. 207(C), pages 34-55.
    9. Sun, Cuiying & Zhang, Xiong & Zhou, Yong-Wu & Cao, Bin, 2022. "Pricing, financing and channel structure for capital-constrained dual-channel supply chains with product heterogeneity," International Journal of Production Economics, Elsevier, vol. 253(C).
    10. Zhang, Qiao & Chen, Jing & Lin, Jun, 2022. "Market targeting with social influences and risk aversion in a co-branding alliance," European Journal of Operational Research, Elsevier, vol. 297(1), pages 301-318.
    11. Wen, Xin & Siqin, Tana, 2020. "How do product quality uncertainties affect the sharing economy platforms with risk considerations? A mean-variance analysis," International Journal of Production Economics, Elsevier, vol. 224(C).
    12. Zhang, Xuefeng & Li, Guo & Liu, Mengqi & Sethi, Suresh P., 2021. "Online platform service investment: A bane or a boon for supplier encroachment," International Journal of Production Economics, Elsevier, vol. 235(C).
    13. Wang, Yingjia & Lin, Jiaxin & Choi, Tsan-Ming, 2020. "Gray market and counterfeiting in supply chains: A review of the operations literature and implications to luxury industries," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    14. Choi, Tsan-Ming, 2020. "Innovative “Bring-Service-Near-Your-Home” operations under Corona-Virus (COVID-19/SARS-CoV-2) outbreak: Can logistics become the Messiah?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 140(C).
    15. Zheng, Zhijun & Li, Gang & Cheng, T.C.E & Wu, Feng, 2022. "Offline supplementary service strategies for the online marketplace: Third-party service or marketplace service?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 164(C).
    16. Hu, Yihong & Qu, Shengnan & Li, Guo & Sethi, Suresh P., 2021. "Power structure and channel integration strategy for online retailers," European Journal of Operational Research, Elsevier, vol. 294(3), pages 951-964.
    17. Niu, Baozhuang & Mu, Zihao, 2020. "Sustainable efforts, procurement outsourcing, and channel co-opetition in emerging markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 138(C).
    18. Ren, Shuyun & Choi, Tsan-Ming & Lee, Ka-Man & Lin, Lei, 2020. "Intelligent service capacity allocation for cross-border-E-commerce related third-party-forwarding logistics operations: A deep learning approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 134(C).
    19. Choi, Tsan-Ming & Guo, Shu, 2020. "Is a ‘free lunch’ a good lunch? The performance of zero wholesale price-based supply-chain contracts," European Journal of Operational Research, Elsevier, vol. 285(1), pages 237-246.
    20. Zhang, Guangming & Dai, Gengxin & Sun, Hao & Zhang, Guitao & Yang, Zhilin, 2020. "Equilibrium in supply chain network with competition and service level between channels considering consumers' channel preferences," Journal of Retailing and Consumer Services, Elsevier, vol. 57(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:130:y:2019:i:c:p:293-311. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.