Product quality selection: Contractual agreements and supplier competition in an assemble-to-order environment

Mehmet Sekip Altug and Garrett van Ryzin

International Journal of Production Economics, 2013, vol. 141, issue 2, 626-638

Abstract: We consider a multi-supplier, single-manufacturer supply chain where each supplier sells a different component at varying quality levels. The manufacturer has to decide on which quality level to choose for each component, trading-off the total cost and total quality. Each supplier decides on a price per unit quality level for its component. We characterize the strategic interaction among the suppliers and analyze the inefficiencies. We find that the inefficiencies due to such quality competition can be quite significant. We then propose and analyze several mechanisms, such as quality-price schedules and revenue sharing, that restore efficiency.

Keywords: Channel coordination; Vertical differentiation; Supply Chain Contracting; Product Design; Assemble-To-Order (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527312004197
Full text for ScienceDirect subscribers only

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:eee:proeco:v:141:y:2013:i:2:p:626-638

DOI: 10.1016/j.ijpe.2012.09.023

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().