How policy support affects vertical relationships in manufacturing supply chains: insights and strategies

Yaqin Lin and Fei Wang

Journal of Management Analytics, 2025, vol. 12, issue 4, 665-691

Abstract: This paper examines vertical outsourcing dynamics using three game-theoretic models: buyer's independent production, buyer-led outsourcing, and supplier-led outsourcing. The analysis systematically evaluates how government policy support affects outsourcing decisions, pricing strategies, and profit distribution in supply chains. Key results indicate that: (1) policy interventions significantly alter competitive dynamics, with buyer support encouraging price reductions to expand market share while supplier support enhances production efficiency and pricing power; (2) allocation of control rights directly determines profit distribution advantages, allowing the dominant party to secure higher profits through favorable contractual terms; (3) different policy types generate asymmetric profit effects, as buyer-oriented policies directly increase its profits whereas supplier-focused measures indirectly boost overall profitability through enhanced market competitiveness. Using Stackelberg game frameworks supported by numerical simulations, this research clarifies the dynamic interrelationships among policy interventions, control structures, and supply chain coordination, offering theoretical insights for industrial policy design and corporate outsourcing optimization.

Date: 2025
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DOI: 10.1080/23270012.2025.2564344

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