Formulating cross-sector horizontal coalition strategies for multi-product assembly systems with a common component

Abstract

This study examines various coalition structures for a multiproduct assembly system with a common component. Under different forms of coalition in the channel, the common component supplier may form partial or grand coalitions with the other suppliers to achieve maximum profit and eliminate supply chain inefficiencies. The optimal pricing decisions of suppliers are characterized and possible coalition structures are proposed. Results document that coalition structures, product demand characteristics, and manufacturing costs profoundly impact optimal wholesale price decisions. In addition, component suppliers are not always worse off even when the remaining suppliers form a partial coalition. Conditions under which all suppliers form a grand coalition are also provided to introduce a fair allocation and a non-empty core. A numerical experiment is conducted to show the influence of model parameters on the profit of different coalition structures. Profit allocation between the suppliers under the multiproduct assembly system is also discussed.