Competition and Structure in Serial Supply Chains with Deterministic Demand

Charles J. Corbett () and Uday S. Karmarkar ()
Additional contact information
Charles J. Corbett: The Anderson School at UCLA, 110 Westwood Plaza, Box 951481, Los Angeles, California 90095-1481
Uday S. Karmarkar: The Anderson School at UCLA, 110 Westwood Plaza, Box 951481, Los Angeles, California 90095-1481

Management Science, 2001, vol. 47, issue 7, 966-978

Abstract: Supply chains often consist of several tiers, with different numbers of firms competing at each tier. A major determinant of the structure of supply chains is the cost structure associated with the underlying manufacturing process. In this paper, we examine the impact of fixed and variable costs on the structure and competitiveness of supply chains with a serial structure and price-sensitive linear deterministic demand. The entry stage is modeled as a simultaneous game, where the players take the outcomes of the subsequent post-entry (Cournot) competition into account in making their entry decisions. We derive expressions for prices and production quantities as functions of the number of entrants at each tier of a multitier chain. We characterize viability and stability of supply-chain structures and show, using lattice arguments, that there is always an equilibrium structure in pure strategies in the entry game. Finally, we examine the effects of vertical integration in the two-tier case. Altogether, the paper provides a framework for comparing a variety of supply-chain structures and for studying how they are affected by cost structures and by the number of entrants throughout the chain.

Keywords: Supply Chains; Competition; Pricing; Production; Entry; Fixed Costs (search for similar items in EconPapers)
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (80)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.47.7.966.9799 (application/pdf)

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:inm:ormnsc:v:47:y:2001:i:7:p:966-978

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().