Competitive consignment matching: applications in supply chain

This paper studies consignment matching between consignee(s) and consignors, where a consignee can be a retailer in a supply chain or a ridesharing platform while consignors are manufacturers or drivers, respectively. Each consignee determines her consignment policy, which consists of a slotting fee and a withholding percentage of the revenue generated by consignors. Consignors then choose which consignee to work with to maximise their respective profits. We consider cases where the consignee is a monopoly or faces competition. In case of a monopoly, we consider a system with one consignee and multiple consigners. We formulate the problem as a 0–1 mixed integer programming and propose an efficient corner point method to find the optimal consignment policy. In case of competition, we consider the consignment matching between two competing consignees and two consignors. When one consignee dominates the other, we model the problem as a leader-follower game and propose a barrier line strategy to obtain its Stackelberg equilibrium. The impact of competition on consignees’ consignment policy, the resulting matching with consignors, and the associated profits, are thoroughly investigated. When the two consignees do not dominate, their competition is modelled as a Cournot-Nash game. We show, however, no pure strategy Nash equilibrium exists. We provide numerical examples to illustrate our algorithms and demonstrate the impacts of competition on consignment policies.