Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/19664
Title: Pricing and lead time decisions in decentralized supply chains
Authors: Liu, L
Parlar, M
Zhu, SX
Keywords: Customer utility
Decentralized supply chains
Decision inefficiency
Double marginalization
Operational and market factors
Price- And lead-time-sensitive demand
Pricing
Promised delivery lead time
Stackelberg game
Issue Date: 2007
Publisher: Institute for Operations Research and the Management Sciences
Source: Management science, 2007, v. 53, no. 5, p. 713-725 How to cite?
Journal: Management science 
Abstract: This paper studies a decentralized supply chain consisting of a supplier and a retailer facing price- and leadtime-sensitive demands. A Stackelberg game is constructed to analyze the price and lead time decisions by the supplier as the leader and the retailer as the follower. The equilibrium strategies of the two players are obtained. Using the performance of the corresponding centralized system as a benchmark, we show that decentralized decisions in general are inefficient and lead to inferior performance due to the double marginalization effect. However, further analysis shows that the decision inefficiency is strongly influenced by market and operational factors, and if the operational factors are dominating, it may not be significant. This shows that before pursuing a coordination strategy with retailers, a supplier should first improve his or her own internal operations.
URI: http://hdl.handle.net/10397/19664
ISSN: 0025-1909
EISSN: 1526-5501
DOI: 10.1287/mnsc.1060.0653
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