The Ordering Strategy Of Duopoly Manufacturers Under Demand Information Updating

With the development of information technology and the state's attention to the function of spot markets in assisting circulation of bulk stock,the maturity of spot markets make itself become an important channel for manufacturer to acquire raw material or parts besides signing long-term contract.Spot trading is characterized by uncertain commodity price,short lead time and high flexibility.Besides cost uncertainty,the manufacturer is faced with high demand volatility.Traditional wholesale contract can fix the cost,but the lead time is long and order quantity is fixed.The channel with a shorter lead time gives the buyer an opportunity to have better demand information and demand forecasting when making order quantity decision.Note that purchase cost usually accounts for 60 to 80 percentage of sales revenue.So it's significant for oligopoly manufacturers to make a trade-off between the two channels to make the optimal procurement decision in achieving competitive advantage.On the basis of the summary of domestic and foreign papers about procurement strategy in the presence of.spot markets and demand information updating,duopoly manufacturers'order strategy under volatile raw material price arid demand forecasting updating is studied.The research objects are the duopoly manufacturers that participate in Cournot competition.The sourcing game is modeled using the theory of game,optimization theory and risk management theory,numerical experiments on the equilibrium strategy of risk-averse oligopoly are made using Matlab software,and how the change of parameters influence the channel decision and output decision are analyzed.Some conclusions are derived.When the wholesale price is exdogenous,if the expected spot price equals to the contract price,risk-neutral monopoly always choose the spot trading,while the oligopoly would select the contract under the condition of the market size being relatively large.Risk attitude also impacts the decisions;to be specifically,when the spot price and market size are irrelative,the more volatile of the spot price,the better off risk-neutral manufacturer will be,but the worse off the risk-averse one.When the expected cost of the spot channel is higher than that of contract,the symmetric duopolies would select different channels due to competition reason.When the wholesale price is determined by the supplier,she would not agree on a supply contract with a monopoly manufacturer.But when faced with duopoly ones,lowing the wholesale price appropriately is beneficial for supplier when the market size is relatively large and expected spot price is low.And risk-averse duopoly would sign contract with supplier when demand volatility level is low and spot price uncertainty is high.