How to Choose a Downstream Partner for a Manufacturer Considering Firms’ Personal Traits?

Abstract

We study the problem of how a manufacturer chooses a downstream partner considering their personality traits in the supply chain. Specifically, we develop a Stackelberg game to investigate which kind of retailer a manufacturer with certain personal traits should choose as its partner: optimistic, realistic, or pessimistic. When a manufacturer sets the wholesale price based on its own belief, we show that an optimistic manufacturer should choose a realistic retailer. A realistic manufacturer should choose a realistic retailer if the production cost is not very high and an optimistic one otherwise. A pessimistic manufacturer should choose an optimistic retailer. All kinds of manufacturers should not choose pessimistic retailers as their partners. When a manufacturer sets the wholesale price based on the real response of a retailer, the manufacturer should choose the realistic retailer when the production cost is low and an optimistic one otherwise. Furthermore, we study the impacts of the traits of the two firms on the profits for the channels and members and find that the impacts depend on the production cost. In addition, by conducting numerical studies to examine the competitive advantages of different kinds of manufacturers, we find that the optimistic manufacturer has the greatest competitive advantage.