Abstract
Based on network externalities and demand uncertainty environment, supply chain competition model is built; we identify the valid mechanism for the alternative range of profit-sharing contracts and also analyze the effect of product substitutability coefficient and network externalities on the alliance and profit-sharing contract. The results show that the vertical alliance contributes profit improvement to both the manufacturer and the retailer when the impact of network externalities on the product substitutability is not strong. However, vertical alliance will be out of operation when the effect of network externalities on the product substitutability is strong.
Highlights
In many industries, the competition among enterprises is evolving to supply chain competition (Boyaci and Gallego [1], Barnes [2], Majumder and Srinivasan [3], and Ai et al [4])
Based on network externalities and demand uncertainty environment, supply chain competition model is built; we identify the valid mechanism for the alternative range of profit-sharing contracts and analyze the effect of product substitutability coefficient and network externalities on the alliance and profit-sharing contract
When 0 < μ < 1, 0 < b < 0.4226(1 − μ), (1) we have ∂r1/∂V > 0 and ∂r4/∂V > 0; (2) if V → ∞, r1 → 1 and r4 → 1. This proposition means that when the products offered by both supply chains exhibit network externalities, the degree of product substitutability under the chain-to-chain competition depends on the network-externality parameter weekly; as the demand variance increases, the retailer’s profit share could increase
Summary
The competition among enterprises is evolving to supply chain competition (Boyaci and Gallego [1], Barnes [2], Majumder and Srinivasan [3], and Ai et al [4]). Wu and Chen [23] focus on the channel structures of two supply chains facing demand uncertainty scenario. Xiao and Yang [27] consider the scenario in which one-retailer to one-manufacturer supply chain competes with an integrated supply chain They explore the impact of demand uncertainty and risk-sharing rule on the revelation information mechanism designed by the manufacturer. Yao et al [31] investigate a profit-sharing contract under two competing retailers who face stochastic demand They find that profit-sharing contract can effectively improve the supply chain performance.
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