Leader Location, Cooperation, and Coordination in Serial Supply Chains

Pranab Majumder and Ashok Srinivasan

Production and Operations Management, 2006, vol. 15, issue 1, 22-39

Abstract: In this paper, we study multi‐stage serial supply chains with price dependent deterministic demand and increasing marginal costs. We analyze the effect of contract leadership (i.e., the ability to offer wholesale price and two‐part tariff contracts) on supply chain performance and use that as a basis to study coordination and cooperation. There is strong evidence of first‐mover advantage in wholesale price contracting which is amplified when the chain is coordinated using two‐part tariff contracts We analyze cooperation and the implications of leader location in uncoordinated chains Our results demonstrate the importance of considering the entire sequence of successive contracts when assessing the performance of a supply chain. We find that in some cases an inefficient supply chain may have a natural tendency to reduce inefficiency through cooperation between non‐leader members

Date: 2006
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