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Impacts of Leader–Follower Structure on Pricing and Production Strategies in a Decentralized Assembly System

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  • Guo Li

    (School of Management and Economics, Beijing Institute of Technology, Beijing 100081, P. R. China2Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, P. R. China)

  • Hui Mao

    (School of Management and Economics, Beijing Institute of Technology, Beijing 100081, P. R. China2Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, P. R. China)

  • Lei Xiao

    (Economics and Management School, Wuhan University, Wuhan 430072, P. R. China)

Abstract

The last decade has witnessed an increase in the number of big-data-based businesses, in particular for those industries with complicated supply chain structure. This paper investigates the pricing and production strategies in a decentralized supply chain composed of a manufacturer, a key supplier, and a general supplier. We establish two different leader–follower structure models. One is the key supplier–leader game, in which the key supplier decides the prices for the other two components, and the manufacturer and general supplier determine the order and production quantities, respectively. The other model is the manufacturer–leader game, in which the manufacturer offers the prices for the other two components, and the suppliers determine the product quantities. We show that equilibrium price and production quantity under the key supplier–leader game are higher than those under the manufacturer–leader game. The key supplier–leader game is suitable for the channel. Moreover, we show that channel payoff has a non-monotonic relation with the production cost of suppliers; it initially increases and then decreases with production costs.

Suggested Citation

  • Guo Li & Hui Mao & Lei Xiao, 2017. "Impacts of Leader–Follower Structure on Pricing and Production Strategies in a Decentralized Assembly System," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(01), pages 1-24, February.
    • Handle: RePEc:wsi:apjorx:v:34:y:2017:i:01:n:s0217595917400036
    DOI: 10.1142/S0217595917400036
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    References listed on IDEAS

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    Cited by:

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    2. Wang, Di & Liu, Weihua & Shen, Xinran & Wei, Wanying, 2019. "Service order allocation under uncertain demand: Risk aversion, peer competition, and relationship strength," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 130(C), pages 293-311.
    3. Amirmohsen Golmohammadi & Alireza Tajbakhsh & Mohamed Dia & Pawoumodom M. Takouda, 2022. "Effect of timing on reliability improvement and ordering decisions in a decentralized assembly system," Annals of Operations Research, Springer, vol. 312(1), pages 159-192, May.
    4. Guo Li & Lin Li & Mengqi Liu & Suresh P. Sethi, 2020. "Impact of power structures in a subcontracting assembly system," Annals of Operations Research, Springer, vol. 291(1), pages 475-498, August.

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