The choice of vertical control structure under chain-to-chain quantity competition and diseconomies of scale

Hai Xia Zhao, Xing Zheng Ai

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

We develop a chain-to-chain model which is defined by two manufacturers and two exclusive retailers under quantity competition and diseconomies of scale. We investigate the impact of quantity competition and scale diseconomies on the choice of vertical control structure from the aspects of manufacturer's performance and the supply chain's performance. The results show that: from the standpoint of manufacturer's performance, centralized structure is a dominant equilibrium that is not affected by the quantity competition and diseconomies of scale. From the attitude of the supply chain's performance, centralized structure is a dominant strategy when quantity competition between the two competitive supply chains is weak, or moderate, or relatively fierce and manufacturer's scale diseconomies is relatively strong; but centralized structure will be a prisoner dilemma when the quantity competition is relatively fierce and diseconomies of scale is relatively weak, or quantity competition is heavily fierce. What we examine expands the results of McGuire(1983) and will contribute to the academic support on the choice of vertical control structure under chain-to-chain competition.

Original languageEnglish
Title of host publication8th International Conference on Service Systems and Service Management - Proceedings of ICSSSM'11
DOIs
Publication statusPublished - 2011
Externally publishedYes
Event8th International Conference on Service Systems and Service Management, ICSSSM'11 - Tianjin, China
Duration: Jun 25 2011Jun 27 2011

Publication series

Name8th International Conference on Service Systems and Service Management - Proceedings of ICSSSM'11

Conference

Conference8th International Conference on Service Systems and Service Management, ICSSSM'11
Country/TerritoryChina
CityTianjin
Period6/25/116/27/11

ASJC Scopus Subject Areas

  • Computer Networks and Communications
  • Information Systems

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