A Game-Theoretic Analysis of Supply Channel Structure With Sequential Entry of Manufacturers

Abstract

This study investigates the impact of the timing of manufacturers’ market entry to an online market on the performances of all the firms in a supply chain. It considers a multi-echelon supply chain which consists of two manufacturers, who sell differentiated products and compete with each other, and an e-tailer, who sets up the channel structure. More specifically, the paper characterizes equilibria for different channel structures when manufacturers enter the market successively. This analysis of a dynamic game composed of discrete periods provides some useful conclusions for operational decision support. From the perspective of the e-tailer, in any setup considered, playing as an agency seller and charging agency fees gives the highest payoff. From the perspective of the manufacturer, achieving a better profit than the other manufacturer is mostly dependent on the channel structure and the timing of his entry to the market. This study also compares the firms’ performances under two different contractual arrangements (with or without long-term contract) and investigates the firms’ as well as the whole supply chain’s benefit that is related to a change in the contractual arrangements.