Stackelberg Leader Research Articles

Contract design for a closed-loop supply chain considering information asymmetry of remanufacturing process innovation

PurposeAsymmetric cost information exists between a supplier and a manufacturer regarding the manufacturer's process innovation for remanufacturing (PIR), which may hurt the supplier's profit. The authors therefore seek to develop a menu of nonlinear pricing contracts for channel information sharing.Design/methodology/approachBased on principal–agent theory, the supplier, acting as a Stackelberg leader, designs a menu of nonlinear pricing contracts to impel the manufacturer to disclose its private cost information on PIR (i.e. PIR efficiency). In addition, the authors compare the equilibrium outcomes under asymmetric and symmetric information to examine the effects of asymmetric PIR information on the production policies and profits of the supplier and the manufacturer.FindingsThe proposed contract menu encourages th4e manufacturer to spontaneously share PIR efficiency information with the supplier. Asymmetric PIR information may distort the output of new products upward or downward, but the output of remanufactured products may only be distorted downward. In addition, the manufacturer with high PIR efficiency gains information rent, and interestingly, the increase in the probability of low PIR efficiency amplifies its information rent. Finally, an asymmetric information environment may increase the threshold for the manufacturer to enter remanufacturing.Originality/valueThe authors probe the issue of the supplier's contract design by jointly considering remanufacturing, process innovation and information asymmetry. The paper expands the influencing mechanism of process innovation information in the remanufacturing field. The authors also observe new results that may offer guidance to decision makers.

Investment Decision of Blockchain Technology in Fresh Food Supply Chains Considering Misreporting Behavior

Effectively managing fresh food supply chains (FFSCs) has long been a big challenge owing to the complexity in practice. Adoption of innovative technologies, blockchain traceability (BT), and cold-chain preservation (CP) technology to improve the efficiency of FFSC management has attracted much attention practically and academically. Distinct from existing studies, this paper provides a specific insight into the application of these two technologies by taking into account their functions in restraining misreporting behavior with BT technology due to its traceability and transparency and improving the freshness with CP technology based on the investment in fresh preservation equipment. With this in mind, this paper develops game theoretic models to identify the conditions under which technologies are the optimal selection for the supplier/retailer. It assumes that the retailer is the Stackelberg leader and the supplier is the follower. The key findings show that: (1) with the foci to eliminate suppliers’ misreporting behavior and minimize the incentive fees, BT investment can increase prices and promote order quantities and demand; (2) only when the consumers demonstrate “appropriate” sensitivity to freshness, a win–win situation can be achieved without adoption of BT technology; and (3) suppliers are not keen to invest in BT or CP technology when the circulation time is short, while retailers prefer to invest in CP technology when the circulation time is long.

Achieving carbon neutrality with smart supply chain management: a CE imperative for the petroleum industry

PurposeWith refineries contributing 68% of CO2 emissions from stationary combustion sources alone, smart technologies and the circular economy (CE) model for resource loop optimization can be a solution for carbon neutrality, especially within petroleum. Thus, this study aims to explore energy conservation by green technology improvement as a CE strategy for resource loop optimization and digital incorporation to maximize reprocessing lead ability rate and carbon-neutral benefits.Design/methodology/approachA game theory approach with Stackelberg equilibrium is considered under government cap-and-trade regulation to stimulate green technology improvement. The refinery acts as a Stackelberg leader and invests in green technology and the retailer as the Stackelberg follower, collects end-of-life lubricants against refund price and offers a two-part-tariff contract to the manufacturer having a significant role in smart technologies.FindingsFirst, green technology improvement is directly influenced by the reprocessing capability and refund price and digital technologies are significant to consider. Second, a two-part-tariff contract coordinates the supply chain for limited reprocessing capability by the retailer. Lastly, the government can effectively manipulate the development of green technology by changing the permit price depending on the intentions.Research limitations/implicationsThe primary limitation is this study has focused on the petroleum sector and data was referenced from the oil refineries of a single country.Practical implicationsOverall, this study provides empirical guidance for policymakers on how to leverage energy-efficient smart technologies for lubricant reprocessing, enabling resource optimization as part of a CE strategy in the petroleum industry and advancing sustainable development goals.Originality/valueThe suggested model responds to the contemporary literature related to CO2 emissions and CE initiatives across the petroleum sector with the extended role of smart technologies and government cap-and-trade regulations.

Acquisition or investment: a manufacturer quality improvement strategic choice

PurposeThis paper explores how the manufacturer’s strategic choice (acquisition or investment) impacts product quality in a supply chain comprising two complementary suppliers and a common manufacturer.Design/methodology/approachThe manufacturer faces six strategic choices to improve product quality: acquiring or investing in the high-capable supplier, the low-capable supplier, or both. As the Stackelberg leader, the manufacturer determines which strategy is adopted, while suppliers are separately responsible for components’ quality and wholesale prices. The authors use game theory and calculate the model with Mathematica.FindingsThe authors develop analytical models to analyze how acquisition costs, investment proportions, component importance and quality improvement coefficients influence decision-makers. The results show that the highest quality may not benefit the manufacturer. Investing in or acquiring a low-capable supplier is better than a high-capable supplier under certain conditions. If the gaps between two suppliers’ quality improvement coefficients and the importance of two components are dramatic, the manufacturer should choose an investment strategy.Originality/valueThis study contributes to the complementary supply chain management by comparing two kinds of strategies-acquisition and investment, with a high-capable supplier and a low-capable supplier.

Investment subsidies and redistributive capital income taxation in a neoclassical growth model

AbstractHow do investment subsidies bear on pure redistribution when coupled with capital income taxes? In a heterogeneous agent, neoclassical growth framework it is found that on impact, with no optimizing behavior, investment subsidies are good for growth but bad for redistribution. The opposite holds for capital income taxes. But when the government acts as a Stackelberg leader vis‐à‐vis the private sector (the follower), the optimal feedback policy is by construction time‐consistent and implies that in a long‐run optimum the tax scheme does not distort accumulation. This holds regardless of social preferences. For the feedback Stackelberg equilibrium I find that (pure) redistribution can go either way and capital income taxes are nonzero in the long‐run, time‐consistent optimum, depending on the social weight of those who receive redistributive transfers, the distribution of pretax factor incomes, and the intertemporal elasticity of substitution. It is argued that investment subsidies may be an important indirect tool for redistribution, and may allow for the separation of “efficiency” and “equity” concerns.

Stackelberg leadership and managerial delegation under hyperbolic demand

Stackelberg leadership and managerial delegation under hyperbolic demand

Multi-agent, multi-site resource allocation under quotas with a Stackelberg leader and network externalities

We model multi-agent resource allocations consisting of many agents and sites, analyze serial dictatorship and simultaneous allocation approaches, and then apply them to an actual case of mussel harvesting. For tractability, the model is developed in the context of a multi-fisher, multi-site fishery where one fisher may emerge as a Stackelberg leader while the rest are followers, but the generalized model can be used to study many other resource allocation problems. Network externalities are introduced in the form of congestion costs, and management systems based on individual and collective quotas are analyzed. The presence of a Stackelberg leader is a novel approach that extends results obtained in resource allocation and indicates the possibility of full elimination of followers, with impacts on the sustainability of fishing communities. We compare allocation outcomes under different assumptions and discuss policies that could prevent the followers from exiting the market.

Environmental policies in a Stackelberg differential game

AbstractWe develop a Stackelberg differential game to analyze the economic effects of the reduction plan through two policy instruments, tradable permits and taxes on emissions. Emissions are a by‐product of firm output. The authority acts as a Stackelberg leader, able to set the optimal instrument's level in the light of a finite‐horizon environmental target. We show that the optimal solution of the game is dynamically consistent. Moreover, optimal environmental policies substantially impact the level and composition of economic activity. The differentiation between “clean” and “dirty” firms allows us to assess distributional effects and how environmental technology may influence the game's outcome. Results are shown to be robust under different parameterizations.

Pricing and green promotion decisions in a retailer-owned dual-channel supply chain with multiple manufacturers

This paper studies the pricing and green promotion effort decisions in a retailer-owned dual-channel supply chain consisting of multiple manufacturers and one retailer. Specifically, we consider the general version of the problem where multiple inter-correlated products are sold through both the online and the offline retail channels, and customer demands are jointly affected by product retail prices and green promotion efforts. With the objective of maximizing the members’ profits, game theoretic models are built to obtain the optimal decisions on wholesale prices, retail price markups and green promotion efforts under different power structures including manufacturer-Stackelberg, retailer-Stackelberg, Nash and integrated power structures. For several important special cases, explicit analytical relationships among optimal decisions and corresponding profits are established. For the more general settings, extensive numerical experiments are conducted to compare the system performance across different power structures. Our results indicate that the individual and overall profits are primarily driven by demand sensitivity to retail price. An increase in demand sensitivity will result in higher profits for all members at equilibrium. Our research also indicates that, regardless of power structures, the overall profit can also be driven up by increased product variety. For greening promotion efforts, the research reveals that the increase in the costs will have greater impactson the profit of the retailer than the manufacturers. Finally, our results demonstrate that being a Stackelberg leader is always advantageous if the objective is to optimize one’s individual profit,. But the significance of such an advantage is affected by the product independence. This paper extends the scope of existing studies by considering multiple correlated products in retailer-owned dual-channel supply chains, and rationalizes members’ pricing and green promotion effort decisions under competition.

Cooperative and noncooperative R&D in duopoly manufacturers with a common supplier

<p style='text-indent:20px;'>We consider the R&D strategy of firms under competitive environments from the supply chain perspective. Specifically, we investigate a supply chain consisting of one upstream component supplier and two downstream manufacturers, who however are the Stackelberg leader(s). At the early stage (<i>R</i>&<i>D</i> <i>stage</i>), the two manufacturers decide on whether to cooperate or not in the R&D activities and how much to invest in R&D accordingly. At the late stage (<i>market stage</i>), the component supplier decides on the uniform wholesale price and the manufacturers decide on the production quantities. Our main findings include: (ⅰ) Cooperative R&D strategy will be adopted when the technology spillover effect is either too large or too small and in contrast non-cooperative strategy will be accepted when the spillover effect is moderate. However, the underlying driving forces for coordination are different when the spillover effect is small or large, i.e., <i>cost reduction effect</i> and <i>sales increasing effect</i>. (ⅱ) Cooperative R&D could increase the social welfare when both the technology spillover effect and the (initial) unit production cost are high. (ⅲ) As the equilibrium under the cooperative R&D strategy is unstable, we give a coordination mechanism, to guarantee the stability of cooperative R&D investments.</p>

Debt financing in a duopoly with asymmetric costs

This paper examines the strategic use of debt financing in a quantity-setting duopoly with asymmetric costs. Before output competition (Cournot or Stackelberg) with demand uncertainty takes place, both firms can strategically choose to issue debt to commit to an aggressive output stance. We find that the strategic use of debt, serving as a commitment device, can help the disadvantaged firm (i.e., the high-cost firm in Cournot competition or the follower firm in Stackelberg competition) to leapfrog its superior rival in product market competition. Moreover, in light of the substitution between first-mover advantage and the commitment advantage of debt financing, when the order of firms’ moves in output is endogenously determined, in a sizable parameter region, there exists a Pareto-dominant equilibrium that the high-cost firm acts as the Stackelberg leader.

Optimal recycling price strategy of clothing enterprises based on closed-loop supply chain

<p style='text-indent:20px;'>More and more garment enterprises begin to pay attention to the importance of recycling, take the corresponding recycling strategy to recycle garment products and remanufacture, forming a closed-loop supply chain (CLSC). In reality, recycling is a complex system, the recycling strategy of clothing brands will not only affect the reverse channel of closed-loop supply chain, but also affect the consumer demand of forward channel, and then affect the profit of supply chain. In order to solve this problem, we propose a CLSC composed of a manufacturer, a retailer and a collector, establish three different Stackelberg leadership models, and derive the optimal recycling strategy. Our results show that consumers' sensitivity to the recycling price will affect the optimal decision of supply chain members. The increase of the recycling market is not always beneficial to the profits of supply chain members. By comparing the profits of the three models, it is found that the retailer leadership model is the most effective scenario of CLCS. The results of this paper provide a reference for garment enterprises to formulate recycling strategies.</p>

Modeling opponent learning in multiagent repeated games

Multiagent reinforcement learning (MARL) has been used extensively in the game environment. One of the main challenges in MARL is that the environment of the agent system is dynamic, and the other agents are also updating their strategies. Therefore, modeling the opponents’ learning process and adopting specific strategies to shape learning is an effective way to obtain better training results. Previous studies such as DRON, LOLA and SOS approximated the opponent’s learning process and gave effective applications. However, these studies modeled only transient changes in opponent strategies and lacked stability in the improvement of equilibrium efficiency. In this article, we design the MOL (modeling opponent learning) method based on the Stackelberg game. We use best response theory to approximate the opponents’ preferences for different actions and explore stable equilibrium with higher rewards. We find that MOL achieves better results in several games with classical structures (the Prisoner’s Dilemma, Stackelberg Leader game and Stag Hunt with 3 players), and in randomly generated bimatrix games. MOL performs well in competitive games played against different opponents and converges to stable points that score above the Nash equilibrium in repeated game environments. The results may provide a reference for the definition of equilibrium in multiagent reinforcement learning systems, and contribute to the design of learning objectives in MARL to avoid local disadvantageous equilibrium and improve general efficiency.

Strategic Successive Refinement With Interdependent Decoders Cost Functions

In decentralized and decision-oriented communication paradigms, autonomous devices strategically implement information compression policies. In this work, we study a strategic communication game between an encoder and two decoders. An i.i.d. information source, observed by the encoder, is transmitted to the decoders via two perfect links, one reaching the first decoder only and the other reaching both decoders, as in the successive refinement setup. All three communicating devices are assumed to be rational, i.e. they want to minimize their respective cost functions, that depend on the source variable and the output symbols of both decoder. The game takes place as follows: the encoder commits to implementing an encoding strategy which induces a Bayesian game among the two decoders. The encoder is the Stackelberg leader and the two decoders are the Stackelberg followers, they select simultaneously the output sequences that minimize their respective long-run costs. We characterize the asymptotic behavior of the long-run optimal cost of the encoder, when the decoders implement decoding strategies that form a Bayes-Nash equilibrium. We show that this optimal cost converges to a single-letter expression which involves two auxiliary random variables and single-letter incentive constraints of the decoders.

PROPOSITIONS ON THE GAMES FIRMS PLAY WHEN DEMAND IS UNCERTAIN: PURE STRATEGIES

ABSTRACT The purpose of this paper is to investigate the weight of uncertainty on a firm''s decision to enter a foreign/domestic market. A game is designed between two symmetrical firms entering a market (Cournot quantity game). In addition, we explore the time of entry with one firm becoming a Stackelberg leader, and the other firm a follower. We find that multiple equilibria exist, and the firm''s decision does not necessarily depend on demand uncertainty. Rather it depends upon cost differentials, and behavior is exogenous. This implies that firms deciding to enter a market after the Covid 19 pandemic will be the ones who have come up with innovative ways to cut operating costs and firms that by nature do not face significantly fixed (and sunk) costs. The paper provides a contribution to the existing literature regarding a firm''s behavior to enter a foreign market. In this way, a fundamental contribution had been done to explaining foreign direct investment. Keywords Cournot game, Stackelberg game, Foreign Direct Investment, Uncertain Demand, Real Option.

Optimal Decisions in Green, Low-Carbon Supply Chain Considering the Competition and Cooperation Relationships between Different Types of Manufacturers.

In this study, we built a green, low-carbon supply chain including one green manufacturer, one green remanufacturer and one retailer in which the manufacturer produces new, green, low-carbon products and the remanufacturer recycles and remanufactures the green, low-carbon products. We assumed the manufacturer to be the Stackelberg leader and the remanufacturer and the retailer to be Stackelberg followers. The game model was solved using backward induction. We discuss the optimal operation strategies for green, low-carbon supply-chain members in a centralized decision-making model, decentralized decision-making model, manufacturer-remanufacturer cooperative decision-making model and manufacturer-retailer cooperative decision-making model. Furthermore, we discuss the impacts of the unit cost savings for remanufacturing, the recovery cost coefficient and the green improvement cost coefficient on the green supply-chain members' optimal decision and profits. The results show that increased unit cost savings from remanufacturing can increase the total profit of the supply chain and promote the recycling and remanufacturing of waste products. Moreover, the total profit of the green, low-carbon supply chain is the highest in the centralized decision-making model and lowest in the manufacturer cooperative decision-making model. When there is a cooperation relationship between the manufacturer and the retailer, the optimal recycling effort level and the optimal greenness level for the new product and the remanufactured product are the highest.

Riding the wave of fashion rental: The role of power structures and green advertising

In recent years, the rise in the collaborative consumption of fashion products has propelled many fashion brands to tap into rental markets and offer rental services. Although many studies have investigated consumer perceptions and attitudes toward fashion rental services, analytical models that help businesses make more informed supply chain decisions are scarce. Consequently, we develop game-theoretical models to study the fashion market with two firms, i.e., a fashion manufacturer and its rental platform partner. The models consider four green-advertising investment situations: no firm invests, only the fashion manufacturer invests, only the rental platform invests, or both firms invest in green advertising for fashion rental services. We compare pricing and green advertising decisions under different power structures between the two firms across the four green-advertising investment situations. Our results demonstrate when and how the power structure affects the key decision variables. We reveal that it is least profitable for both firms if neither contributes to green advertising, while both firms obtain the highest profits when they both invest in green advertising. In the two situations when only one firm invests in green advertising, we note that it is not necessarily unfavorable for firms to accept the green-advertising cost proactively. Specifically, the Stackelberg follower benefits from investing in green advertising. Furthermore, in these two situations, whether or not the Stackelberg leader covers the green-advertising cost is more important than their identity. Our results and analysis reveal important managerial implications that can assist firms in excelling in the fashion rental market.

Strategic climate policy with endogenous plant location: The role of border carbon adjustments

AbstractCarbon leakage and the relocation of firms is one of the main concerns of governments when choosing their climate policy. In a strategic trade model with endogenous plant location, we study the effect of border carbon adjustments (BCAs) on global welfare and emissions in an emission tax competition game between two asymmetric countries for two games: a simultaneous and a sequential game. Without BCAs, a ruinous “race to the bottom” with no relocation of firms is the only Nash equilibrium in a simultaneous game. In a sequential game, additionally, a “wise chicken” equilibrium may emerge where the Stackelberg leader gives in, letting all his/her plants relocate to avoid being stuck at the bottom. With BCAs, equilibrium emission taxes in both countries are higher, implying lower global emissions and usually higher global welfare in both games. With BCAs, the environmental more concerned country accepts that its firm partially relocates abroad, as it is rewarded with better control of global emissions, tariff revenues and higher net profits (profits minus taxes). This avoids high environmental damages and that either net profits are zero because of high subsidy levels in a “race to the bottom” or because all production plants have moved abroad.

Retailer inventory data sharing in a fresh product supply chain

This research explores the value of data sharing in a two-echelon, fresh product supply chain consisting of a retailer and manufacturer. Demand is stochastic and price sensitive. Decision-making is decentralized and the supply chain operates with a simple linear wholesale price contract. We employ a game theoretic model in which the manufacturer is a Stackelberg leader. Although fresh product supply chains are ubiquitous in the marketplace, academic guidance is limited, particularly in the context of data sharing and when price is determined endogenously.Our analysis shows that although data sharing helps to improve product freshness and reduce waste, sufficiently improved product freshness is the key for both suppliers and retailers to benefit financially. Otherwise, either party or the entire supply chain can be worse off. We demonstrate that data sharing is most valuable when product is somewhat perishable and demand is volatile. For highly perishable or non-perishable products, the manufacturer benefits but the retailer is harmed. Our results suggest that the drivers that motivate retailers to share inventory data in a fresh product supply chain are distinct from extant knowledge. The results provide insight into strategies that not only improve both parties’ performance, but also reduce food waste at the same time.

Encroachment strategy and revenue-sharing contract for product customization

This paper investigates the optimal encroachment strategy of product customization and the revenue-sharing contract in a two-stage supply chain consisting of a contract manufacturer (CM) and an original equipment manufacturer (OEM). In addition to producing and wholesaling standard products for OEM, CM has the motive to manufacture customized products under store brand and encroach the end consumer market. Stackelberg game models with different strategies (encroachment or no-encroachment) under both decentralized and centralized supply chains are explored. Models analyzing CM’s encroachment with product customization are rare. Besides, this paper characterizes both vertical partnership and horizontal competitive relationships between supply chain members. The findings show that it is unprofitable to encroach on the retailing market for CM when the acceptance degree of store brand is low. There is a threshold value of customization level that can gain positive demand. Interestingly, as the Stackelberg leader, OEM always suffers from the encroachment. Then a revenue-sharing contract is designed that can fully integrate the decentralized supply chain and obtain a contract-implementing Pareto zone. Furthermore, a numerical example is developed, demonstrating the validity of the obtained analytical results. On this basis, some suggestions for industry managers are discussed in the form of managerial insights.