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Decentralization versus coordination in competing supply chains under retailers’ extended warranties

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Listed:
  • Jianhua Ma

    (Shenzhen University)

  • Xingzheng Ai

    (University of Electronic Science and Technology of China)

  • Wen Yang

    (Shenzhen University)

  • Yanchun Pan

    (Shenzhen University)

Abstract

This paper studies a two-tier duopoly competing supply chain system consisting of two manufacturers and two exclusive retailers. Both manufacturers produce differentiated products and both retailers provide extended warranties for the products they sell. Two types of channel-structure strategy options are considered: a decentralized structure with a wholesale price contract and a coordinated structure with a sophisticated contract. We first derive the equilibrium outcomes under three possible chain-to-chain competition scenarios. Subsequently, we reveal how manufacturers control their retail channels to gain more supply chain system profit under an interactive environment with supply chain competition and retailers’ extended warranties. We find that pure coordinated channel competition and pure decentralized channel competition may both reach equilibrium. Furthermore, the interaction forces of supply chain competition and extended warranty service significantly impact the characteristics of the equilibria. Finally, we analyze the competing supply chain’s coordination contract design by using the example of a two-part tariff contract, and determine the feasible contract parameter range that results in a win-win solution for supply chain members.

Suggested Citation

  • Jianhua Ma & Xingzheng Ai & Wen Yang & Yanchun Pan, 2019. "Decentralization versus coordination in competing supply chains under retailers’ extended warranties," Annals of Operations Research, Springer, vol. 275(2), pages 485-510, April.
    • Handle: RePEc:spr:annopr:v:275:y:2019:i:2:d:10.1007_s10479-018-2871-6
    DOI: 10.1007/s10479-018-2871-6
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    2. Wang, Dongfan & He, Zhen & He, Shuguang & Zhang, Zhaomin & Zhang, Yiwen, 2021. "Dynamic pricing of two-dimensional extended warranty considering the impacts of product price fluctuations and repair learning," Reliability Engineering and System Safety, Elsevier, vol. 210(C).
    3. Huang, Hongfu & Liu, Feng & Zhang, Peng, 2021. "To outsource or not to outsource? Warranty service provision strategies considering competition, costs and reliability," International Journal of Production Economics, Elsevier, vol. 242(C).
    4. Zhang, Zhichao & Xu, Haiyan & Zhao, Yingxue & Liu, Zhi & Chen, Kebing, 2023. "Extended warranty service provision: A strategic analysis for the E-commerce platform supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 177(C).
    5. Sarat Kumar Jena & Abhijeet Ghadge, 2022. "Product bundling and advertising strategy for a duopoly supply chain: a power-balance perspective," Annals of Operations Research, Springer, vol. 315(2), pages 1729-1753, August.
    6. Lianmin Zhang & Lei Guan & Daniel Zhuoyu Long & Houcai Shen & Huajun Tang, 2023. "Who is better off by selling extended warranties in the supply chain: the manufacturer, the retailer, or both?," Annals of Operations Research, Springer, vol. 328(2), pages 1557-1583, September.
    7. Jiawei Hu & Suqin Sun & Xuemei Zhang & Qiang Meng, 2022. "Optimal Extended Warranty Strategy: Provided by Manufacturer or E-Commerce Platform?," Sustainability, MDPI, vol. 14(19), pages 1-19, September.
    8. Yunlong Yu & Tiaojun Xiao & Zhangwei Feng, 2020. "Price and cold-chain service decisions versus integration in a fresh agri-product supply chain with competing retailers," Annals of Operations Research, Springer, vol. 287(1), pages 465-493, April.
    9. Patanjal Kumar & Sachin Kumar Mangla & Yigit Kazancoglu & Ali Emrouznejad, 2023. "A decision framework for incorporating the coordination and behavioural issues in sustainable supply chains in digital economy," Annals of Operations Research, Springer, vol. 326(2), pages 721-749, July.
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