We examine a decentralized supply chain supply chain in which a single assembler buys complementary components from n suppliers and assembles the final product in anticipation of demand. Players take actions in the following sequence. First, (Stage 1) the suppliers form coalitions between themselves. Second, (Stage 2) the coalitions compete for a position in the negotiation sequence. Finally, (Stage 3) the coalitions negotiate with the assembler on allocations of the supply chain's profit. We model the multilateral negotiations between the suppliers and the assembler sequentially, i.e., the assembler negotiates with one coalition at a time. Each of these negotiations is modeled using the Nash bargaining concept. Further, in forming coalitions, we assume that players are farsighted. We then predict, at equilibrium, the structure of the supply chain as a function of the players' relative negotiation powers. In particular, we show that the assembler always prefers the outcome where suppliers do not form coalitions. However, when the assembler is weak (low negotiation power) the suppliers join forces as a grand coalition. But when the assembler is powerful, the suppliers stay independent, which is the preferred outcome to the assembler.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1021602_code620318.pdf?abstractid=1021602&mirid=1

A Bargaining Framework in Supply Chains (The Assembly Problem)

Supply chain contracting and the use of information are undoubtedly two critical and influential areas in modern supply chain management. However, relatively little is known about supply chain cont...

A review on supply chain contracting with information considerations: information updating and information asymmetry

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In this paper, we study the practice of forecast sharing and supply chain coordination with a game-theoretical model. We find that in a one-shot version of the game, forecasts are not shared truthf...

/pdf/information-sharing-in-a-long-term-supply-chain-relationship-3qhki1bt2u.pdf

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Supply chain coordination with revenue sharing contracts