A Cournot-Stackelberg Model of Supply Contracts with Financial Hedging and Identical Retailers
René Caldentey and
Martin Haugh
Foundations and Trends(R) in Technology, Information and Operations Management, 2017, vol. 11, issue 1-2, 124-143
Abstract:
We study the performance of a supply chain where N retailers and a single producer compete in a Cournot-Stackelberg game. We assume the retailers are budget-constrained and their profits depend on the realized path of some tradeable (stochastic) economic index. The supply chain might therefore be more profitable if the retailers were able to reallocate their budgets across different states of nature. In order to affect such a reallocation, we assume the retailers are able to trade dynamically in the financial market. We solve the Cournot-Stackelberg equilibrium when the retailers have identical budgets and study the impact that competition and hedging have on the supply chain and on the various players including the firms themselves, the end consumers and society as a whole. We show, among other things, that when the retailers can hedge there exists an optimal level of competition, ¯N that is often finite and optimal from the perspective of the consumers, the firms and society as a whole. In contrast, when the retailers cannot hedge, these welfare measures are uniformly increasing in N.
Keywords: Operational risk management; Contingency planning; Commodity price risk; Supply chain disrutpions (search for similar items in EconPapers)
JEL-codes: G20 G32 M11 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://dx.doi.org/10.1561/0200000075 (application/xml)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:now:fnttom:0200000075
Access Statistics for this article
More articles in Foundations and Trends(R) in Technology, Information and Operations Management from now publishers
Bibliographic data for series maintained by Lucy Wiseman (lucy.wiseman@nowpublishers.com).