Redesigning product lines in a period of economic crisis: a hybrid simulated annealing algorithm with crossover

Bandit products have captured significant market shares in China and have started to expand throughout the world. A striking feature of supply chains for bandit products is decentralization, where the upstream firm determines the product quality and the downstream firms compete on prices. We study the competition between a centralized mainstream firm and a decentralized bandit supply chain. We demonstrate that the structural difference between the mainstream firm and the bandit supply chain reduces competition intensity and the quality difference between their products. Surprisingly, the inherent inefficiency in a bandit supply chain, combined with the force of competition, actually leads to both higher product quality and higher price. Furthermore, due to the free-riding effect, the bandit supply chain may even offer higher quality products than the mainstream firm. The mainstream firm’s profit as a function of the free-riding effect is U-shaped, so that free-riding by the bandit supply chain may eventually benefit the mainstream firm. Finally, decentralization benefits the bandit supply chain when the competition is on product features.     

Equilibrium structures of two supply chains with price and displayed-quantity competition

This paper studies the equilibrium structure of two competing supply chains, each of which consists of one manufacturer and one retailer who faces the demand influenced by price and displayed quantity. Each chain has two structure options: integration or decentralization. Under linear demand, we present the optimal pricing/displayed quantity of all members in the two chains under possible structures: two integrated chains (II), two decentralized chains (DD), and one integrated chain and one decentralized chain (ID or DI). We then analyse the impact of the intensities of price and displayed-quantity competition on the equilibrium structure of two supply chains. The results show that both price and displayed-quantity competition intensities influence significantly the equilibrium structure. Moreover, under certain specific conditions, both price and displayed-quantity competition can have the two chains fall into the prisoner’s dilemma and play a game of chicken as well.     

需求不确定下供应链间古诺博弈决策分析

通过引入区间数和心态指标将需求函数模糊化,研究了需求不确定下供应链间竞争的决策问题。首先,分别构建了分散-分散决策、集中-分散决策和集中-集中决策三种模式下的供应链间价格竞争模型;其次,分析了不同竞争模式下市场规模等变量对零售价格、顾客需求量和供应链利润的影响;最后,以两条供应链为例,进行算例分析,并在此基础上,进一步分析了心态指标、市场规模等变量对最终决策结果的影响。     

Impact of product pricing and timing of investment decisions on supply chain co-opetition

In supply chain co-opetition, firms simultaneously compete and co-operate in order to maximize their profits. We consider the nature of co-opetition between two firms: The product supplier invests in the technology to improve quality, and the purchasing firm (buyer) invests in selling effort to develop the market for the product before uncertainty in demand is resolved. We consider three different decision making structures and discuss the optimal configuration from each firm’s perspective. In case 1, the supplier invests in product quality and sets the wholesale price for the product. The buyer then exerts selling effort to develop the market and following demand potential realization, sets the resale price. In case 2, the supplier invests in product quality followed by the buyer’s investment in selling effort. Then, after demand potential is observed, the supplier sets the wholesale price and the buyer sets the resale price. Finally, in case 3, both firms simultaneously invest in product quality and selling effort, respectively. Subsequently, observing the demand potential, the supplier sets the wholesale price and the buyer sets the resale price. We compare all configuration options from both the perspective of the supplier and the buyer, and show that the level of investment by the firms depends on the nature of competition between them and the level of uncertainty in demand. Our analysis reveals that although configuration 1 results in the highest profits for the integrated channel, there is no clear dominating preference on system configuration from the perspective of both parties. The incentives of the co-opetition partners and the investment levels are mainly governed by the cost structure and the level of uncertainty in demand. We examine and discuss the relation between system parameters and the incentives in desiging the supply contract structure.     

Bargaining in competing supply chains with uncertainty

Substantial literature has been devoted to supply chain coordination. The majority of this literature ignores competition between supply chains. Moreover, a significant part of this literature focuses on coordination that induce the supply chain members to follow strategies that produce the equilibria chosen by a vertically integrated supply chain. This paper investigates the equilibrium behavior of two competing supply chains in the presence of demand uncertainty. We consider joint pricing and quantity decisions and competition under three possible supply chain strategies: Vertical Integration (VI), Manufacturer’s Stackelberg (MS), and Bargaining on the Wholesale price (BW(α), α is the bargaining parameter) over a single or infinitely many periods. We show that, in contrast to earlier literature, using VIVI (VI in both chains) is the unique Nash Equilibrium over one period decision, while using MSMS or BW(α)BW(α) may be Nash Equilibrium over infinitely many periods.     

闭环供应链竞争的博弈分析与链内协调合同设计

假定生产商委托零售商回收废旧产品以进行再制造活动,研究两条分别由单生产商和单零售商组成的闭环供应链的竞争和链内协调。对应两条闭环供应链均为分散式供应链、均为集中式供应链、一条为分散式供应链另一条为集中式供应链,运用博弈论和均衡分析方法分别建立了三种情况下刻画闭环供应链竞争的带均衡约束的均衡模型、纳什均衡模型和带均衡约束的优化模型,进行了模型求解。基于合同理论,提出供应链竞争下协调链内零售商的零售价和回收价格决策的批发价加回收补贴合同。最后的算例验证了模型的合理性和协调合同的有效性。研究表明:产品零售价、需求量与产品替代效应正相关,废旧产品供给量、供应链利润与回收价格敏感性正相关;供应链协调是供应链竞争下的占优策略,有利于提高供应链的运作效率,但两条协调供应链之间的竞争将更激烈,存在囚徒困境现象。     

Price and quality competition: The effect of differentiation and vertical integration

This paper studies an instance of price and quality competition between firms as seen in the recent Internet market. Consumers purchase a product based on not only its price but also its quality level; therefore, two firms compete in determining their prices and quality levels to maximize their profits. Characterizing this competition from a microeconomic viewpoint, we consider two possible business strategies that firms can utilize to overcome the competition—the differentiation and the vertical integration with another complementary firm. We show an interesting result not seen in the well-known Bertrand price competition: not only does the differentiation always increase the firms’ profits, but also it can increase the consumer’s welfare in a quality-sensitive market. We further derive that under some mild conditions the monopolistic vertical integration that excludes the combination-purchase with a competitor’s product is beneficial for both the integrated firm and its consumers.     

供应链链际竞争的研究与发展

本文试图从供应链的结构、竞争的数学经济模型,以及工业应用的领域等三个方向, 概括和介绍国际和国内有关供应链链际竞争的研究工作。其中绝大多数的数学模型是建立 在竞争的各方都是具有相同性质和相同结构的供应链的前提假设下,因此是对称的链际竞 争模型,而且主要局限于二层或者三层的供应链网络。但是我们也特别介绍了一些非对称的模型可以用来研究不同性质和结构的供应链之间的竞争问题。另一个有意义的方向是研 究链内的合作契约在链际竞争中所起到的作用。     

TIMBER SUPPLY UNDER DEMAND UNCERTAINTY: WELFARE GAINS FROM PERFECT COMPETITION WITH RATIONAL EXPECTATIONS

ABSTRACT. This paper presents a noneconometric approach to estimating the short‐run timber supply function based on optimal harvest decisions. Determination of optimal harvest levels and estimation of supply function coefficients are integrated into one step by incorporating a parametric short‐run timber supply function into the harvest decision model. In this manner we convert the original harvest decision model into a new optimization problem with the supply function coefficients functioning as “decision variables.” Optimal solution to the new decision model gives the coefficients of the short‐run supply function and, indirectly, the optimal harvest levels. This approach enables us to develop stochastic models of the timber market that are particularly useful for forest sector analysis involving comparison of alternative institutional regimes or policy proposals and when the timber market is affected by stochastic variables. For demonstration purposes, we apply this method to compare the performances of two timber market regimes (perfect competition and monopoly) under demand uncertainty, using the Swedish data. The results show that the expected timber price is 22 percent lower and the expected annual timber supply is 43 percent higher in the competitive market than in the monopoly market. This confirms the theoretical result that monopoly reduces supply and increases price. The expected social welfare gain from perfect competition over monopoly is about 24 percent.     

Models for capacity and electricity market design

The paper employs Operations Research methods for analysis of electricity and capacity markets. We provide two algorithms that determine the optimal capacity structure with account of fixed and variable costs. The first one relates to the case where there are several capacity types, and for each type the capacity constraint is not binding. The second algorithm is applicable when electricity is produced by standard small generators with the same capacity and different costs. Then we study two typical architectures of the market and examine their Nash equilibria. We consider a uniform price supply function auction in the electricity market. For pay-as-bid and uniform price versions of the capacity market design, we compare the equilibrium outcomes with the optimal capacity structure. The paper shows that the market equilibrium corresponds to the optimal capacity structure under conditions of pure competition, full rationality, and completely informed agents in the market. However, under more realistic assumptions, selection of the optimal structure is unlikely. Finally we provide the auction design that realizes such selection of capacities and does not require any additional information of each producer besides his own production costs. We establish sufficient conditions for perfect competition in the market.     

基于双边市场理论的金融超市竞争定价策略研究

基于双边市场理论,重点分析金融超市在双寡头垄断情形下的竞争定价策略。即在在一般定价模型的基础上,构建起加入金融超市双边用户交易次数为歧视标准的价格歧视竞争模型。并且围绕金融超市追求长期利益和短期利益两种不同动机,对采取该策略均衡时最终用户的均衡进入价格、金融超市利润和市场份额进行比较分析。最后,给出金融超市实施价格歧视策略的对策和建议。     

Green product development under competition: A study of the fashion apparel industry

Motivated by the observed industrial issues, we analytically develop a fashion supply chain consisting of one manufacturer and two competing retailers and investigate how retail competition and consumer returns affect green product development in fashion apparel. In the basic model, that is, the pure “product greenness level” game, we find that the optimal greenness level of the fashion product decreases along with the level of market competition. This finding implies that a more competitive market leads to a lower optimal greenness level. We also identify that when the consumer return rate increases, the optimal product greenness level is substantially reduced. In the extended model with joint decisions on greenness and pricing, we find that the optimal product greenness level for the whole channel is always higher in the scenario when both retailers charge a higher retail price than in the case with a lower retail price. As such, the underdevelopment of green fashion products is a result of fashion industry features, such as an extremely competitive environment for green product development, relatively low retail prices for fashion products, and high consumer return rates. Therefore, fashion companies should join a co-opetition game for the green product market and simultaneously enhance their efficiency in managing consumer returns. To support our analytical findings, we conduct extensive industrial interviews with various representative companies. Based on this multi-methodological approach (MMA), this paper generates practice-relevant managerial insights that not only contribute to the literature, but also act as valuable references for industrialists.     

On the uniqueness of Bertrand equilibrium

We introduce product differentiation in the model of price competition with strictly convex costs in which firms have to supply all of the forthcoming demand. We find that although a continuum of equilibria exists in a homogeneous product market, the competitive price equilibrium is the only robust one. Specifically, as long as the equilibrium correspondence is nonempty, the equilibrium price converges to the competitive price when the degree of product differentiation shrinks to zero.     

Contracting with demand uncertainty under supply chain competition

We examine supply chain contracts for two competing supply chains selling a substitutable product, each consisting of one manufacturer and one retailer. Both manufacturers are Stackelberg leaders and the retailers are followers. Manufacturers in two competing supply chains may choose different contracts, either a wholesale price contract in which the retailer??s demand forecasting information is not shared, or a revenue-sharing contract in which the retailer??s demand forecasting information is shared. Under supply chain competition and demand uncertainty, we identify which contract is more advantageous for each supply chain, and under what circumstances.     

Business value and risk in the presence of price controls: an option-based analysis of margin squeeze rules in the telecommunications industry

Pricing rules specific to the German telecommunications market limit the incumbents flexibility, providing a competitive advantage to all other market participants. More specifically, the incumbent is required not to offer products to its end customers at prices below a predetermined level in order to prevent margin squeezes. In contrast, competitors can freely choose their pricing strategy. In this paper, we propose the imposition of equivalent price barriers on all market participants in order to avoid price margin squeezes and reduce regulatory discrimination at the same time. We tailor a duopoly model to the German context, integrating the regulation of access pricing and price margin squeezes. Under standard parameter assumptions, we demonstrate that no economically significant effects on the value of market participants are observed for the case of market wide price regulation. We conclude that adjusting the current regulatory framework can enhance competition and increase welfare.     

不同博弈框架下多竞争零售商的双渠道供应链定价决策研究

在Bertrand竞争、Stackelberg竞争及集中决策下,研究由单制造商与多竞争零售商组成的双渠道供应链的定价决策问题。运用两阶段优化技术、博弈论及矩阵论,讨论了多竞争零售商与单制造商在价格方面相互竞争的问题,给出不同市场竞争模式及集中决策下供应链成员的博弈均衡解。对比不同博弈框架及集中决策下供应链成员的定价决策,通过数值实验分析了价格敏感度及零售商个数对最优定价决策和最大利润影响,给出一些管理学理论与见解,为双渠道供应链中各成员的管理者制定最优决策提供理论支持。     

Collaborative production planning of supply chain under price and demand uncertainty

This research is motivated by an automobile manufacturing supply chain network. It involves a multi-echelon production system with material supply, component fabrication, manufacturing, and final product distribution activities. We address the production planning issue by considering bill of materials and the trade-offs between inventories, production costs and customer service level. Due to its complexity, an integrated solution framework which combines scatter evolutionary algorithm, fuzzy programming and stochastic chance-constrained programming are combined to jointly take up the issue. We conduct a computational study to evaluate the model. Numerical results using the proposed algorithm confirm the advantage of the integrated planning approach. Compared with other solution methodologies, the supply chain profits from the proposed approach consistently outperform, in some cases up to 13% better. The impacts of uncertainty in demand, material price, and other parameters on the performance of the supply chain are studied through sensitivity analysis. We found the proposed model is effective in developing robust production plans under various market conditions.     

Effects of constrained supply and price contracts on agricultural cooperatives

Planning strategies depend in part on the supply flow structure of a supply chain. In food supply chains, many firms are constrained by raw material supply (e.g. vegetables and milk). This paper first examines the economic consequences of constrained supply in agricultural cooperatives. Secondly, it deals with the effects of adding price contracts to the current cooperative contract. This model combines an inventory policy approach and a Monte-Carlo simulation, to take into account price uncertainty. We illustrate our results using the case of a dairy cooperative.     

顾客选择偏好下的供应链竞争的随机用户均衡模型

本文建立了具有顾客选择偏好的供应链与供应链竞争随机用户网络均衡模型。基于随机用户均衡理论和logit模型,利用变分不等式,得出在竞争均衡态下胜出的供应链,其市场占有率和所提供产品的市场价格等参数。该模型从供应链与供应链竞争的角度,很好刻画了顾客的对具有价格等差异性的同类产品的选择偏好,并给出了研究思路,适用算法和合理的经济解释。     

Coordinating a three-stage supply chain with competing manufacturers

It is common for multiple manufacturers to compete in one common market. This paper considers a three-stage supply chain consisting of two competing manufacturers, one distributor, and one retailer. The two manufacturers’ products are substitutable with each other, and both manufacturers sell their products through the common distributor and the common retailer. In this supply chain, three contract mechanisms are discussed. The first one is wholesale-price (WP) contracts. The second one is pairwise revenue-sharing (PRS) contracts indicating that the revenues are shared by all pairs of adjacent entities. The third one is spanning revenue-sharing (SRS) contract indicating that the retailer simultaneously shares his revenues with all supply chain members. First, we discuss the effects of competition between manufacturers on both decentralized and centralized supply chains under the WP contracts. Second, we discuss the coordination mechanisms. The PRS and SRS contracts are used to coordinate the entire supply chain. We present the drawbacks of the PRS contracts in coordinating this competing supply chain and suggest using the SRS contract instead. After an SRS contract is adopted, it is evaluated using the WP contracts as a benchmark. The conditions necessary for an SRS contract to achieve a win–win outcome are then presented. Finally, some numerical examples are provided.