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Entry game in supply chains with yield uncertainty

©2022 The Author(s). Published by AIMS, LLC. This is an Open Access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

The first author is partially supported by the National Social Science Foundation of China under grant number [19BGL023]

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  • Yield uncertainty presents great challenges to supply chain management, which affects market supply and thus the profits of all the supply chain parties. In the context of a supply chain comprising a retailer and multiple potential suppliers with random yields, we examine the impact of yield uncertainty on the suppliers' entry decisions, and how it affects the retailer's profit and consumer surplus. We find that yield uncertainty initially increases the number of suppliers entering the market, then decreases, and it is negatively correlated with consumer surplus. We also analyze how the retailer's purchasing price strategy influences the suppliers' decisions to enter the market. We find that retailer subsidies can improve the performance of and coordinate the supply chain. In addition, the subsidy contract is in the forms of production subsidy and surplus subsidy when the suppliers do not make and make production decisions, respectively.

    Mathematics Subject Classification: Primary: 90B06, 90B30; Secondary: 91A06.

    Citation:

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  • Figure 1.  Effects of $ \delta $ on the number of suppliers and order quantity

    Figure 2.  Effects of $ \delta $ on the supply chain's expected profit and consumer surplus

    Figure 3.  Comparison of retailer's profit and wholesale price under the two contracts

    Figure 4.  Supplier profit under the combination of the wholesale price, subsidy, and order quantity

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