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http://hdl.handle.net/10397/11283
Title: | On the advantage of quantity leadership when outsourcing production to a competitive contract manufacturer | Authors: | Wang, Y Niu, B Guo, P |
Issue Date: | Jan-2013 | Source: | Production and operations management, Jan.-Feb. 2013, v. 22, no. 1, p. 104-119 | Abstract: | This study investigates a supply chain comprising an original equipment manufacturer (OEM) and a contract manufacturer (CM), in which the CM acts as both upstream partner and downstream competitor to the OEM. The two parties can engage in one of three Cournot competition games: a simultaneous game, a sequential game with the OEM as the Stackelberg leader, and a sequential game with the CM as the Stackelberg leader. On the basis of these three basic games, this study investigates the two parties' Stackelberg leadership/followership decisions. When the outsourcing quantity and wholesale price are exogenously given, either party may prefer Stackelberg leadership or followership. For example, when the wholesale price or the proportion of production outsourced to the CM is lower than a threshold value, both parties prefer Stackelberg leadership and, consequently, play a simultaneous game in the consumer market. When the outsourcing quantity and wholesale price are decision variables, the competitive CM sets a wholesale price sufficiently low to allow both parties to coexist in the market, and the OEM outsources its entire production to this CM. This study also examines the impact of the supply chain parties' bargaining power on contract outcomes by considering a wholesale price that is determined via the generalized Nash bargaining scheme, finding a Stackelberg equilibrium to be sustained when the CM's degree of bargaining power is great and the non-competitive CM's wholesale price is high. | Keywords: | Competitive CM Contract manufacturing Cournot competition Outsourcing Quantity leadership |
Publisher: | Wiley-Blackwell | Journal: | Production and operations management | ISSN: | 1059-1478 | EISSN: | 1937-5956 | DOI: | 10.1111/j.1937-5956.2012.01336.x | Rights: | © 2012 Production and Operations Management Society This is the peer reviewed version of the following article: Wang, Y., Niu, B. and Guo, P. (2013), On the Advantage of Quantity Leadership When Outsourcing Production to a Competitive Contract Manufacturer. Prod Oper Manag, 22: 104-119, which has been published in final form at https://doi.org/10.1111/j.1937-5956.2012.01336.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. |
Appears in Collections: | Journal/Magazine Article |
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