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Title: Managing downstream competition via capacity allocation
Authors: Chen, F.
Li, J.
Zhang, H. 
Keywords: capacity allocation
equilibrium analysis
lexicographic mechanism
proportional mechanism
retail competition
supply chains
wholesale pricing
Issue Date: 2013
Citation: Chen, F., Li, J., Zhang, H. (2013). Managing downstream competition via capacity allocation. Production and Operations Management 22 (2) : 426-446. ScholarBank@NUS Repository.
Abstract: Consider a supply chain with one supplier and multiple retailers. The supplier produces a single product and sells it to the retailers, who in turn sell the product to consumers. The supplier has limited production capacity, and the retailers are engaged in a Cournot competition at the consumer/market level. When the sum of the retailer orders exceeds the capacity, the supplier allocates her capacity according to a pre-announced allocation mechanism. Two mechanisms are considered: proportional allocation and lexicographic allocation. An extensive study of the two allocation mechanisms shows that the lexicographic mechanism has the ability to dampen the competition at the retail level, increasing the profits for both the supplier and the supply chain. © 2013 Production and Operations Management Society.
Source Title: Production and Operations Management
ISSN: 10591478
DOI: 10.1111/j.1937-5956.2012.01373.x
Appears in Collections:Staff Publications

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