| dc.description.abstract |
It is common for a retailer to sell products from competing manufacturers. How then
should the firms manage their contract negotiations? The supply chain coordination
literature focuses either on a single manufacturer selling to a single retailer or
one manufacturer selling to many (possibly competing) retailers. We find that some
key conclusions from those market structures do not apply in our setting, where multiple
manufacturers sell through a single retailer. We allow the manufacturers to compete
for the retailer's business using one of three types of contracts: a wholesale-price
contract, a quantity-discount contract, or a two-part tariff. It is well known that
the latter two, more sophisticated contracts enable the manufacturer to coordinate
the supply chain, thereby maximizing the profits available to the firms. More importantly,
they allow the manufacturer to extract rents from the retailer, in theory allowing
the manufacturer to leave the retailer with only her reservation profit. However,
we show that in our market structure these two sophisticated contracts force the manufacturers
to compete more aggressively relative to when they only offer wholesale-price contracts,
and this may leave them worse off and the retailer substantially better off. In other
words, although in a serial supply chain a retailer may have just cause to fear quantity
discounts and two-part tariffs, a retailer may actually prefer those contracts when
offered by competing manufacturers. We conclude that the properties a contractual
form exhibits in a one-manufacturer supply chain may not carry over to the realistic
setting in which multiple manufacturers must compete to sell their goods through the
same retailer. © 2010 INFORMS.
|
|
