 Quality strategies in supply chain alliances of disposable itemsMarcos Singer (), Patricio Donoso () and Pedro Traverso Omega, 2003, vol. 31, issue 6, 499-509 Abstract: This paper studies a single-product distribution channel where a supplier manufactures items of a given type, some of which are defective, that are sold by a retailer who only detects a subset of the defective items, passing the rest along to customers. We conjecture the structure of the demand and cost functions, assuming customers to have a decreasing marginal aversion to bad quality while both the supplier and the retailer make marginally increasing efforts to avoid bad quality. This allows us to deduce several implicit parameters of a cost model based on observable data, such as the share of the channel margin. Once the parameters of the model are available, we analyze the result of vertical integration. Although we confirm the well-known fact that vertical integration improves the quality perceived by the customer, we characterize the supplier's decision of whether or not to provide a better quality in terms of the individual channel margins. As an alternative, we derive the conditions under which the supplier and the retailer may devise a mutually beneficial transfer contract that simultaneously increases their profit and improves quality. Keywords: Quality; management; Supply; management; Vertical; integration; Strategic; alliances (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jomega:v:31:y:2003:i:6:p:499-509 Ordering information: This journal article can be ordered from Access Statistics for this article Omega is currently edited by B. Lev More articles in Omega from Elsevier |
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