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Supplier Competition in Decentralized Assembly Systems with Price-Sensitive and Uncertain Demand


  • Li Jiang

    () (Department of Logistics and Maritime Studies, Hong Kong Polytechnic University, Hong Kong SAR, China)

  • Yunzeng Wang

    () (A. Gary Anderson Graduate School of Management, University of California at Riverside, Riverside, California 92521)


In a decentralized assembly supply chain, independent suppliers produce a set of complementary components from which an assembler assembles a final product and sells it to the market. In such a channel, several competitive forces interact with one another to affect the price and quantity decisions of the firms involved. These include: (1) the direct competition each supplier faces for producing the same component, (2) the indirect competition among the suppliers producing the set of complementary components needed for assembling the final product, and (3) the vertical interaction between the assembler and the component suppliers. This paper shows that the direct competition that one supplier faces helps improve the performance of the assembler and all the other suppliers in the channel; and surprisingly, it can help improve the performance of this particular supplier facing the competition as well. Second, the assembler benefits from a merger of suppliers producing different components in the complementary set. Furthermore, the assembler prefers a merger of suppliers with less direct competition over a merger of suppliers with more direct competition.

Suggested Citation

  • Li Jiang & Yunzeng Wang, 2010. "Supplier Competition in Decentralized Assembly Systems with Price-Sensitive and Uncertain Demand," Manufacturing & Service Operations Management, INFORMS, vol. 12(1), pages 93-101, January.
  • Handle: RePEc:inm:ormsom:v:12:y:2010:i:1:p:93-101

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    References listed on IDEAS

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    Cited by:

    1. Xiao Huang & Tamer Boyacı & Mehmet Gümüş & Saibal Ray & Dan Zhang, 2016. "United We Stand or Divided We Stand? Strategic Supplier Alliances Under Order Default Risk," Management Science, INFORMS, vol. 62(5), pages 1297-1315, May.
    2. Tsao, Yu-Chung & Lu, Jye-Chyi, 2016. "Trade promotion policies in manufacturer-retailer supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 96(C), pages 20-39.
    3. Zhengping Wu & Wanshan Zhu & Pascale Crama, 2011. "The Newsvendor Problem with Advertising Revenue," Manufacturing & Service Operations Management, INFORMS, vol. 13(3), pages 281-296, July.
    4. repec:spr:annopr:v:257:y:2017:i:1:d:10.1007_s10479-015-1966-6 is not listed on IDEAS
    5. Yuhong He & Shuya Yin, 2015. "Joint Selling of Complementary Components Under Brand and Retail Competition," Manufacturing & Service Operations Management, INFORMS, vol. 17(4), pages 470-479, October.
    6. repec:spr:annopr:v:257:y:2017:i:1:d:10.1007_s10479-015-1865-x is not listed on IDEAS
    7. Başak Kalkancı & Feryal Erhun, 2012. "Pricing Games and Impact of Private Demand Information in Decentralized Assembly Systems," Operations Research, INFORMS, vol. 60(5), pages 1142-1156, October.
    8. Oberlaender, Michael & Dobhan, Alexander, 2014. "Behavioral analysis and adaptation of a negotiation based, quantitative planning approach for hybrid organizations," International Journal of Production Economics, Elsevier, vol. 157(C), pages 31-38.
    9. Jiang, Li, 2012. "The implications of postponement on contract design and channel performance," European Journal of Operational Research, Elsevier, vol. 216(2), pages 356-366.
    10. Sun, Jiong & Debo, Laurens, 2014. "Sustaining long-term supply chain partnerships using price-only contracts," European Journal of Operational Research, Elsevier, vol. 233(3), pages 557-565.
    11. Dobhan, Alexander & Oberlaender, Michael, 2013. "Hybrid contracting within multi-location networks," International Journal of Production Economics, Elsevier, vol. 143(2), pages 612-619.
    12. repec:eee:jomega:v:75:y:2018:i:c:p:27-56 is not listed on IDEAS
    13. Liying Mu & Milind Dawande & Xianjun Geng & Vijay Mookerjee, 2016. "Milking the Quality Test: Improving the Milk Supply Chain Under Competing Collection Intermediaries," Management Science, INFORMS, vol. 62(5), pages 1259-1277, May.
    14. Qi, Lian & Shi, Jim (Junmin) & Xu, Xiaowei, 2015. "Supplier competition and its impact on firm׳s sourcing strategy," Omega, Elsevier, vol. 55(C), pages 91-110.
    15. Edirisinghe, N.C.P. & Bichescu, B. & Shi, X., 2011. "Equilibrium analysis of supply chain structures under power imbalance," European Journal of Operational Research, Elsevier, vol. 214(3), pages 568-578, November.


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