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Consumer search, transshipment, and bargaining power in a supply chain

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  • Meng Li
  • Tao Li

Abstract

We study a decentralised supply chain with one manufacturer and two symmetric retailers who could transship their excess inventory between each other. Without transshipment, the retailer’s unsatisfied customers search and buy the product at the other retailer with some probability. With transshipment, the retailer can transship the other retailer’s excess inventory to fulfil its own unmet demand. However, a transshipment price is often charged by one retailer for transshipping goods to another. We show the retailer’s profit is unimodal in the transshipment price, and the manufacturer’s profit increases in the customer search probability. Although the retailer’s preference over transshipment depends on the magnitude of search probability and transshipment price, the retailer may always prefer the transshipment no matter their magnitude. We then study the effect of bargaining power over the transshipment decision (whether to transship between retailers and at what transshipment price). Our analysis suggests that the manufacturer always prefers to control the transshipment price rather than to control whether to transship, while the retailer can prefer both. We also find that increasing bargaining power always benefits the manufacturer but could hurt the retailer. We finally check the robustness of our results by investigating the case with asymmetric retailers

Suggested Citation

  • Meng Li & Tao Li, 2018. "Consumer search, transshipment, and bargaining power in a supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 56(10), pages 3423-3438, May.
  • Handle: RePEc:taf:tprsxx:v:56:y:2018:i:10:p:3423-3438
    DOI: 10.1080/00207543.2017.1326644
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    Cited by:

    1. Chun-Hung Chiu & Gang Hao & Xin Dai & Hang Xie, 2020. "Inventory sharing of professional optics product supply chain with equal power agents," Annals of Operations Research, Springer, vol. 291(1), pages 169-194, August.
    2. Silbermayr, Lena & Waitz, Martin, 2024. "Omni-channel inventory management of perishable products under transshipment and substitution," International Journal of Production Economics, Elsevier, vol. 267(C).
    3. Zheng, Hong & Wu, Huamin & Tian, Lin, 2022. "Healthcare service enhancement with patient search," Journal of Business Research, Elsevier, vol. 152(C), pages 398-409.
    4. Cheng, Lihong & Guo, Xiaolong & Li, Xiaoxiao & Yu, Yugang, 2022. "Data-driven ordering and transshipment decisions for online retailers and logistics service providers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 161(C).
    5. Jiguang Wang & Yushang Hu & Weihua Qu & Liuxin Ma, 2022. "Research on Emergency Supply Chain Collaboration Based on Tripartite Evolutionary Game," Sustainability, MDPI, vol. 14(19), pages 1-25, September.
    6. Silbermayr, Lena, 2020. "A review of non-cooperative newsvendor games with horizontal inventory interactions," Omega, Elsevier, vol. 92(C).

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