Game theoretic analysis of horizontal carrier coordination with revenue sharing in E-commerce logistics

Abstract

This paper proposes comparisons among two different competitive power structures with and without horizontal coordination. We conduct a game theoretic analysis on the situation where two logistics service providers compete in an e-commerce logistics market with respect to the order quantity and service level decision on a particular logistics service product. Under a consumer utility-based demand, we acquire the equilibrium order quantity decisions and optimal profits under the centralised setting and decentralised setting. An analytical model is established to examine the existence of the Nash equilibrium in the service game. We then prove that the logistics service demand depends on different competitive power structures with the establishment of Cournot game and Stackelberg game model. The analytical results and the equilibrium analysis of the e-commerce logistics system are investigated. After that, we compare the equilibrium results among the centralised system, Cournot game, and Stackelberg game. To empower the horizontal carrier coordination, we design a revenue sharing contract for the decentralised model. A numerical study illustrates the impact of parameters on the optimal decision variables. In this paper, we prove the effectiveness of horizontal carrier collaboration and explicate the reason for the lower marginal profit in logistics theoretically.