Impacts of Leader–Follower Structure on Pricing and Production Strategies in a Decentralized Assembly System

Guo Li, Hui Mao and Lei Xiao
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Guo Li: School of Management and Economics, Beijing Institute of Technology, Beijing 100081, P. R. China2Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, P. R. China
Hui Mao: School of Management and Economics, Beijing Institute of Technology, Beijing 100081, P. R. China2Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, P. R. China
Lei Xiao: Economics and Management School, Wuhan University, Wuhan 430072, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2017, vol. 34, issue 01, 1-24

Abstract: The last decade has witnessed an increase in the number of big-data-based businesses, in particular for those industries with complicated supply chain structure. This paper investigates the pricing and production strategies in a decentralized supply chain composed of a manufacturer, a key supplier, and a general supplier. We establish two different leader–follower structure models. One is the key supplier–leader game, in which the key supplier decides the prices for the other two components, and the manufacturer and general supplier determine the order and production quantities, respectively. The other model is the manufacturer–leader game, in which the manufacturer offers the prices for the other two components, and the suppliers determine the product quantities. We show that equilibrium price and production quantity under the key supplier–leader game are higher than those under the manufacturer–leader game. The key supplier–leader game is suitable for the channel. Moreover, we show that channel payoff has a non-monotonic relation with the production cost of suppliers; it initially increases and then decreases with production costs.

Keywords: Big data; assembly system; leader–follower structure; key supplier–leader; manufacturer–leader (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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DOI: 10.1142/S0217595917400036

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