Coordination and ripple effect of a coopetition supply chain with quantity-discount contract

Abstract

In many studies of supply-chain coordination, researchers just consider upstream and downstream are no cooperative. This paper investigates a coopetition supply chain which consists of one supplier and duopoly manufacturers that produce substitutable products. The supplier does not cooperate with one manufacturer, but cooperates with the other. To coordinate this coopetition supply chain, we introduce a quantity discount pricing model to address coordination condition of the supply chain. We get the coordination condition — the optimal quantity discount rate. Then, under operating uncertainty caused by manufacturers' competition of price, we discuss the intensity of supply-chain ripple effect. We find that quantity-discount contract can coordinate the supply-chain, but cannot remove supply-chain ripple effect in the situation we assume. Besides, in the coordination condition, the price competition from downstream will cause the superposing ripple effect of market demand. And, the effect results in increasing operation cost of the upstream.