Strategic Inventories in a Supply Chain with Downstream Cournot Duopoly

Xiaowei Hu, Jaejin Jang, Nabeel Hamoud and Amirsaman Bajgiran

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Abstract: The inventories carried in a supply chain as a strategic tool to influence the competing firms are considered to be strategic inventories (SI). We present a two-period game-theoretic supply chain model, in which a singular manufacturer supplies products to a pair of identical Cournot duopolistic retailers. We show that the SI carried by the retailers under dynamic contract is Pareto-dominating for the manufacturer, retailers, consumers, the channel, and the society as well. We also find that the retailer's SI, however, can be eliminated when the manufacturer commits wholesale contract or inventory holding cost is too high. In comparing the cases with and without downstream competition, we also show that the downstream Cournot duopoly undermines the retailers in profits, but benefits all others.

Date: 2021-09, Revised 2022-01
New Economics Papers: this item is included in nep-com, nep-cta, nep-gth, nep-ind and nep-isf
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Published in International Journal of Operational Research, 2021 Vol.42 No.4, pp.524 - 542

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2109.06995

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