Supply Chain Coordination With Bargaining

In the context of economic globalization and supply chain competition,supply chain management has become increasingly prominent in the survival and development of enterprises,and has increasingly become the focus of scholars and practitioners in the industry.A supply chain typically consists of independent firms acting on their own interests,and inefficiency occurs when their interests are not aligned.It is widely accepted that coordinating a supply chain is a promising approach to attain a sustainable competitive advantage.Moreover,to coordinate a supply chain it is necessary to align the incentives of the firms within the chain.The most common models of supply chain strategies is Manufacturer Stackelberg.However,procurement contract negotiations are commonly observed in a range of industries.Therefore,it is necessary to use the framework of bargaining game to study the income(profit)distribution and contract parameters(price,quantity,etc.)in the supply chain.Supply chain risk is a growing issue for executives and supply disruptions is of particular concern.Natural,accidental and intentional causes such as fire,terrorism,labor strikes,manufacturing quality failures,and supplier bankruptcies may cause supply disruptions in the supply.Therefore,enterprises should adopt appropriate strategies and coping strategies to effectively manage supply chain risks,so as to reduce the negative impact of uncertain events on enterprise business activities and ensure the stable operation and rapid growth of economy.This paper studies whether competitive enterprises should cooperate horizontally to manage supply interruption risk.Specifically,consider a system composed of two competing retailers.Each retailer orders from his own supplier and has different disruption probabilities.The two retailers can manage their supply risk through cooperation or competition.The results show that retailers will be better off if they manage supply risk through cooperation.This paper uses the bargaining model to design the cooperation mechanism,and determines the retailer’s order quantity and the transfer quantity when the retailer’s supply is interrupted.Under this mechanism,the cooperation between the two retailers is more favorable than competition,and the optimal order quantity is equal to the corresponding optimal order quantity under the centralized decision-making.In addition,this paper also describes the perfect Bayesian equilibrium of bargaining game when the interruption probability of a retailer is private information.It is found that the income of retailers with private information may be higher than that of retailers with complete information.Information sharing has always been regarded as an indispensable means of supply chain coordination.Many enterprises are reluctant to share information with other enterprise members in the supply chain because they are worried that the disclosure of information will reduce their bargaining power in the supply chain or the competitiveness of their peers.Considering that the enterprises in the supply chain are not only unwilling to share private information,but also transfer false information to their upstream and downstream enterprises,resulting in information asymmetry,leading to the emergence of inefficiency.This paper analyzes a dynamic bargaining game in which suppliers and retailers negotiate on the quantity and price of products.Retailers may not know the exact cost components of suppliers,but only know that there are two types of suppliers: high cost and low cost,so the type of supplier is his private information.The supplier and retailer negotiate the product price and delivery volume in the dynamic alternating bargaining,and the retailer provides the initial quotation.In view of the game structure of alternating quotation and unilateral asymmetric information,in the process of dynamic bargaining game,the supplier transmits his information through quotation,and the retailer selects the types of suppliers through quotation.This paper describes the perfect Bayesian equilibrium of bargaining game.It is found that order quantity distortion and information rent can be avoided,so as to achieve supply chain coordination.Previous studies on supply chain mostly believed that decision-makers were completely rational "economic people",without considering the complexity and uncertainty factors in the practice of supply chain management,especially human behavior and cognition.However,with the development of experimental economics and the emergence of a large number of practical evidence,the research viewpoint based on complete rationality is gradually replaced by limited rationality.On the basis of bounded rationality,behavioral operation integrates psychology,sociology and other knowledge into a new field of operation management.It focuses on the impact of human behavior and cognition on the supply chain system.This paper considers a supply chain composed of one supplier and two retailers.The supplier and retailer decide the wholesale price through negotiation,and the retailer decides the retail price according to the wholesale price.When suppliers negotiate prices with retailers,retailers will pay attention to the fairness of channel profit distribution.Firstly,it analyzes how channel distribution fairness affects the wholesale price and retail price between suppliers and retailers.It is found that retailers’ attention to channel distribution fairness will lead to suppliers providing lower wholesale price and lower retail price,so as to improve the total profit of the channel.Secondly,the model is extended by considering the fairness between peers in the supply chain of one supplier and two retailers.The supplier has two negotiation strategies: one is that the supplier negotiates with two retailers at the same time.At this time,the wholesale price of the other party cannot be observed between retailers,so it will not attract the attention of fairness among peers.Second,the supplier negotiates with two retailers through priority,which will cause the second retailer’s problem of fairness between peers.In other words,the potential counter-offer of the second retailer in sequential negotiation depends on the decision of the first retailer.Therefore,the fairness problem caused by peer comparison in sequential negotiation will affect the optimal wholesale price and retail price of the second retailer.The results show that the second retailer pays attention to two types of fairness,but receives higher wholesale prices and lower profits.Since these two negotiation strategies may produce different contract results,this paper analyzes how suppliers choose negotiation strategies.It is found that when retailer 2 pays more attention to the fairness of peer comparison than the fairness of channel profit distribution,the selection order negotiation is more favorable to suppliers.