•I consider two competing suppliers in a platform: high- and low-volume suppliers.•The paper examines strategic contracting between the platform and suppliers.•Each supplier chooses one of two ...contracts: wholesale or agency.•Asymmetric contract choices can arise in equilibrium.
This paper examines strategic contracting between a monopoly platform and suppliers that sell their goods through the platform. I consider two competing suppliers: a high-volume supplier with the larger potential demand and a low-volume supplier with the smaller one. Each supplier chooses one of two contracts: wholesale or agency. The platform has to strategically determine the royalty rate for the agency contract by taking into account which contracts the suppliers will choose. I show that the platform offers a low (high) royalty rate to induce the suppliers to adopt the agency (wholesale) contract when product substitutability is low (high) enough. More interestingly, when the degree of substitution is at an intermediate level, asymmetric contracting, in which only the low-volume supplier adopts the agency contract, can arise in equilibrium. This result is related to the fact that many long-tail and niche products with lower potential market sizes are traded on platform-based marketplaces, such as Amazon Marketplace and Walmart Marketplace.
Cap-and-trade regulation is generally accepted as one of the most effective market-based mechanisms to curb carbon emissions. In this paper, we study the production and emission abatement decisions ...of a Make-To-Order supply chain consisting of a manufacturer and a retailer under cap-and trade regulation. Specifically, the manufacturer can reduce unit product carbon emission by using green technology, with the cooperation of a retailer by certain contracts, who sell the products to environment-concerned consumers. Wholesale price and cost sharing contracts are considered in the supply chain. We list some main conclusions here. First, as carbon trading price increases, the optimal production quantities (the optimal abatement levels) firstly decrease (increase) and then remain constant. Second, both wholesale price and cost sharing contracts can coordinate the supply chain. Last, combining the optimal operational decisions under the two contracts with two-part tariff agreement, we design a contract in which the retailer pays a lump fee to the manufacturer, and find that there is an interval of the lump fee to achieve Pareto improvement for the two firms.
•We study the supply chain coordination problem under cap-and-trade regulation.•Adopting green technology makes Pareto improvement for firms in the supply chain.•Both wholesale price and cost sharing contracts can coordinate supply chain.•Firms can cooperate to reduce carbon emission without affecting their profits.
•Manufacturer-led closed loop supply chain with direct or retailer collection.•Manufacturer's equitable share is larger, but the retailer gets at least a minimum.•Channel is coordinated by a constant ...wholesale price in both collection models.•Retailer's disadvantageous and advantageous inequality are sufficiently strong.•Used item collection rate and channel profit are higher in manufacturer collection.
The literature on closed loop supply chains (CLSCs) has ignored advantageous inequality aversion while modelling the fairness concern of channel partners and demonstrated that coordinating a decentralised channel requires complex price contracts. In this paper, we show that a constant wholesale price contract can coordinate a decentralised channel in a manufacturer-led CLSC if the retailer's advantageous inequality aversion is sufficiently strong. The result is valid for a range of equitable shares of the channel profit, such that the allocated share of the manufacturer is larger than that of the retailer, and the retailer's share is greater than a minimum threshold. Used product collection rate and channel profit are higher when the retailer is inequality averse compared to when she is a profit maximiser. The results are independent of whether the end-of-use products are collected by the manufacturer or the retailer. We also show that the collection rate is higher, and both channel partners are better-off, under the manufacturer collection model. To obtain these results, we solve multistage sequential move games under the two collection models. We apply Karush–Kuhn–Tucker conditions for constrained optimisation, to determine the boundaries for the existence of the subgame perfect Nash equilibrium.
E-book sales surged after Amazon introduced the Kindle e-reader at the end of 2007 and accounted for about one quarter of all trade book sales by the end of 2013. Amazon's aggressive (low) pricing of ...e-books led to allegations that e-books were bankrupting brick and mortar book booksellers. Amazon's commanding position as a bookseller also raises concerns about monopoly power, and publishers are concerned about Amazon's power to displace them in the book value chain. I find little evidence that e-books are primarily responsible for the decline of independent booksellers. I also conclude that entry barriers are not sufficient to allow Amazon to set monopoly prices. Publishers are at risk from Amazon's monopsony (buyer) power and so sought "agency" pricing in an effort to raise the price of ebooks, promote retail competition, and reduce Amazon's influence as an e-retailer. (In the agency pricing model, the publisher specifies the retail price with a commission for the retailer. In a traditional, "wholesale" pricing model, publishers sell a book to retailers at a wholesale price and retailers set the retail price.) Although agency pricing was challenged by the Department of Justice, it may yet prevail in some form as an equilibrium pricing model for e-book sales.
The Bright Side of Supplier Encroachment Arya, Anil; Mittendorf, Brian; Sappington, David E. M
Marketing science (Providence, R.I.),
09/2007, Volume:
26, Issue:
5
Journal Article
Peer reviewed
The common wisdom is that a retailer suffers when its wholesale supplier encroaches on the retailer's operations by selling directly to final consumers. We demonstrate that the retailer can benefit ...from encroachment even when encroachment admits no synergies and does not facilitate product differentiation or price discrimination. The retailer benefits because encroachment induces the encroaching supplier to reduce the wholesale price in order not to diminish unduly the retailer's demand for the manufacturer's wholesale product. The lower wholesale price and increased downstream competition mitigate double marginalization problems and promote efficiency gains that can secure Pareto improvements.
In this paper, coordination of a manufacturer-retailer chain is investigated where the manufacturer innovates in manufacturing process and the retailer applies promotional efforts. The market demand ...is assumed to be stochastic dependent on the retailer's promotional and the manufacturer's innovation efforts. The retailer uses a periodic review inventory system for replenishing items and decides on order-up-to level, review period and promotional efforts level. On the other hand, it is possible for the manufacturer to boost the market demand by innovation in manufacturing process. The retailer's promotional and manufacturer's innovation efforts not only affect their profits, but also impress their mutual profits and the supply chain performance in an indirect manner. Firstly, we develop the decentralized and centralized decision-making models along with solution procedures and concavity analysis to solve the models. Although the centralized model improves the profitability of the whole supply chain, it may reduce the profitability of either the retailer or the manufacturer. Therefore, we propose a new compensation-based wholesale price contract for encouraging actors to take part in the joint decision-making scheme. Moreover, a profit sharing strategy based on the bargaining power of members is proposed for distributing the surplus profit between members. Finally, the results of the decentralized, centralized and coordination models are compared using test problems and some sensitivity analyses are presented.
•In this a manufacturer innovates manufacturing process and the retailer applies promotional efforts.•Demand is a function of retailer's promotional and manufacturer's innovation efforts.•Decentralized and centralized decision-making models are developed and solved.•A new compensation-based wholesale price contract takes part in the joint decision-making.•Profit sharing strategy based on the bargaining power of members is proposed and analyzed.
●Investigate whether a retailer should bargain a wholesale price with a manufacturer.●The retailer can accept the price determined by the manufacturer if not bargaining.●Our game-theoretic model ...derives the following results.●The retailer should always bargain the price in a single-channel environment.●By contrast, it should not always bargain the price in a dual-channel environment.
In this paper, we investigate the problem of whether a retailer should bargain over the wholesale price of a product with a manufacturer or accept the price unilaterally determined by the manufacturer. To investigate the problem, we develop a game-theoretic model describing a supply chain organized by one manufacturer and one retailer. Intuitively, if there is a bargaining opportunity, a retailer is better off bargaining over the wholesale price rather than simply accepting the price determined by the manufacturer. Consistent with this intuition, we first show the benchmark outcome that the retailer achieves a higher profit through bargaining over the price when the manufacturer uses only a single-channel supply chain, in which the manufacturer sells only through the retailer. Conversely, however, we demonstrate that this intuitive result can be completely reversed in a dual-channel supply chain environment, in which the manufacturer is able to sell products not only through the retailer but also directly to end-consumers. Specifically, we find that if a retailer's bargaining power is sufficiently strong and if consumers' substitutability between channels is substantially high, full acceptance of the wholesale price dictated by the manufacturer earns the retailer a higher profit than bargaining. This counterintuitive result is a warning to retailers in dual-channel environments because if a retailer does not accept the wholesale price dictated by a manufacturer, but heedlessly exploits its strong power and bargains with the manufacturer, it may ultimately harm itself and reduce its own profits.
In this paper, we employ a combination of time regression discontinuity design method (T‐RD) and the difference‐in‐difference method (DID) to identify and quantify the causal effects of the strict ...lockdown policy on vegetable prices using multiple‐year daily price data from 151 wholesale markets of Chinese cabbage. We find that the lockdown policy caused a large and immediate surge in price and price dispersion of Chinese cabbage, though they fluctuated smoothly for the same period in normal years. The DID results further show that the price surge peaked in the fourth week of lockdown but gradually came down to the level of a normal year by week 11. However, the price rose again (though to a much smaller extent) in response to the resurgence of COVID‐19 in a few provinces in early‐mid April but quickly returned to the normal level in week 15 when the lockdown measures were largely removed. We also find that the supply chain disruption is the driving factor for the price hike. Policy implications are drawn.
Both the edge and the cloud can provide computing services for mobile devices to enhance their performance. The edge can reduce the conveying delay by providing local computing services while the ...cloud can support enormous computing requirements. Their cooperation can improve the utilization of computing resources and ensure the QoS, and thus is critical to edge-cloud computing business models. This paper proposes an efficient framework for mobile edge-cloud computing networks, which enables the edge and the cloud to share their computing resources in the form of wholesale and buyback. To optimize the computing resource sharing process, we formulate the computing resource management problems for the edge servers to manage their wholesale and buyback scheme and the cloud to determine the wholesale price and its local computing resources. Then, we solve these problems from two perspectives: i) social welfare maximization and ii) profit maximization for the edge and the cloud. For i), we have proved the concavity of the social welfare and proposed an optimal cloud computing resource management to maximize the social welfare. For ii), since it is difficult to directly prove the convexity of the primal problem, we first proved the concavity of the wholesaled computing resources with respect to the wholesale price and designed an optimal pricing and cloud computing resource management to maximize their profits. Numerical evaluations show that the total profit can be maximized by social welfare maximization while the respective profits can be maximized by the optimal pricing and cloud computing resource management.
This paper analyzes coordination of a manufacturer–distributer–retailer supply chain, where the manufacturer exhibits corporate social responsibility (CSR). In manufacturer-Stackelberg game setting, ...the paper proposes a contract-bargaining process to resolve channel conflict and to distribute surplus profit among the channel members. The contract-bargaining process consists of two wholesale price discount-Nash bargaining. One between the distributer and the retailer based on the outcome of that between the distributer and the manufacturer. Although the contract-bargaining process cuts out channel conflict and distributes surplus profit, the wholesale prices are quite different from those of a pure profit maximizing supply chain. The wholesale price of the manufacturer is less than its marginal production cost above a threshold of CSR. Even it is negative for the manufacturer׳s heavy CSR practice. So, the manufacturer׳s profit may be negative. The behavior of the wholesale price of the distributer is same as that of the manufacturer but for higher threshold of CSR.
•We focus on coordination of a socially responsible three-layer supply chain.•Perfect welfare maximizing motive of manufacturer does not resolve channel conflict.•A contract-bargaining process is proposed to resolve channel conflict and to distribute profit.•Wholesale price of manufacturer is less than marginal cost or negative for heavy CSR practice.•Wholesale price of distributer follows the same but for higher threshold of CSR.
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