Downstream competition and profits under different input price bargaining structures

In a vertically related duopoly with input price bargaining, this paper re-examines the downstream firms’ profitability under different market competition degrees. It is shown the rather counterintuitive result that downstream firms earn highest profits with semi-collusion, whose level depends on the upstream bargaining structures, the relative parties’ bargaining power, and the parameters measuring the degree of product differentiation in the downstream market. Concerning social welfare, the key result is that policymakers can tolerate some degree of collusion with decentralized bargaining structures; centralized structures advise for a more procompetitive policy.

Strategic Manufacturers in Online Cash-Back Shopping

Cash-back industry is now witnessing surging development. Prior works on cash-back sites focus mainly on the demand side, while we are also interested in the supply side. We develop a game theoretical model with a manufacturer, an online retailer, cash-back site(s), and heterogeneous consumers. We find that when the cash-back channel cannot attract new consumers, the manufacturer raises the wholesale price and the retailer raises the retail price, which may lead to the cash-back paradox where all consumers face higher prices. Therefore, when there exists a cash-back channel, the manufacturer is always worse off and the retailer is better off when low-type consumers’ product valuation is intermediate, and consumer surplus and social welfare are both lower. When the retailer affiliates with two competing cash-back sites, the manufacturer contributes to the mitigation of double marginalization problem by raising the wholesale price to a lesser extent, which drives the surprising result that when there exists downstream competition, cash-back sites enjoy higher commission rate and under some circumstances, offer lower cash-back rate and enjoy higher profit. We also show that only when the cash-back channel makes the size of the low-type segment double will the manufacturer be better off with this channel.

Information sharing in two-tier supply chains considering cost reduction effort and information leakage

<p style='text-indent:20px;'>This study investigates information sharing in two-tier supply chai-ns considering cost reduction effort and information leakage, with either upstream competition (system SC) or downstream competition (system RC). Results show that in system SC without information leakage, the retailer shares information with one supplier when suppliers are efficient in cost reduction, shares information with neither supplier when suppliers are inefficient in cost reduction, and shares information with two suppliers when suppliers are intermediate in cost reduction efficiency. nformation leakage won't affect the information sharing decisions of the retailer. In system RC with or without information leakage, both retailers share information with the supplier when the supplier is efficient in cost reduction and neither retailer shares information with the supplier when the supplier is inefficient in cost reduction. However, the threshold of cost reduction efficiency without information leakage is always lower than that with information leakage, which demonstrates that it is less likely for retailers to share information with information leakage. What's more, the two retailers choose the same information sharing strategies without information leakage but the opposite information sharing strategies with information leakage when the cost reduction efficiency is intermediate.</p>