Abstract
In this paper, a decision-support is developed for a strategic problem of identifying target prices for the single buyer to negotiate with multiple suppliers to achieve common goal of maintaining sustained business environment. For this purpose, oligopolistic-competitive equilibrium prices of suppliers are suggested to be considered as target prices. The problem of identifying these prices is modeled as a multi-leader-single-follower bilevel programming problem involving linear constraints and bilinear objective functions. Herein, the multiple suppliers are considered leaders competing in a Nash game to maximize individual profits, and the buyer is a follower responding with demand-order allocations to minimize the total procurement-cost. Profit of each supplier is formulated on assessing respective operational cost to fulfill demand-orders by integrating aggregate-production-distribution-planning mechanism into the problem. A genetic-algorithm-based technique is designed in general for solving large-scale instances of the variant of bilevel programming problems with multiple leaders and single follower, and the same is applied to solve the modeled problem. The developed decision support is appropriately demonstrated on the data of a leading FMCG manufacturing firm, which manufactures goods through multiple sourcing.
Highlights
Suppliers compete on prices to attract a competitive demand share from their buyer, in an oligopolisticmonopsony market, for maximizing their profits
We develop a decision support for identifying competitive target prices for the buyer’s negotiations with multiple suppliers in the oligopolistic-monopsony market
We model the problem of identifying the competitive target prices as a multi-leader-single-follower (MLSF) bilevel programming problem
Summary
Suppliers compete on prices to attract a competitive demand share from their buyer, in an oligopolisticmonopsony market, for maximizing their profits. Multiple examples of the discussed market ecosystem are observed in many sectors, but to the best of our knowledge, the problem of identifying target prices for negotiations among the buyer and suppliers is not studied in the literature. For formulating the action-and-reaction mechanism of price-negotiations in our bilevel programming model, we consider suppliers as leaders and the buyer as a follower This is based on the chronology of communication among them viz, suppliers making the first move by offering the price quotes to the buyer, whereas the buyer responding to those in terms of the demand-order allocation. The price-competition among the group of suppliers for receiving maximum profitable demand shares from the buyer leads to a game situation among these suppliers, thereby making it appropriate to model the problem as an MLSF bilevel programming problem.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
