Supplier development under cooperative and non-cooperative investment structures

PurposeThis study analyzes supplier development investment decisions under a triadic setting (two buyers and a common supplier). In a triadic setting, the supplier development investment decision of one buyer can have a spillover effect of the benefits on other buyer. Therefore, it is utmost important for the investing buyer to understand the impact of benefit spillover on other competing buyers'. Therefore, one of the purposes of this study to analyze the supplier development investment decision of buyers under two scenarios. First, under cooperative development structure where both buyers jointly invest in supplier and share equal benefits. Second, non-cooperative investment structure where both buyers individually invest in supplier development and share unequal benefits.Design/methodology/approachIn order to assess the impact of supplier development investment decisions on the profitability of buyers and the common supplier, the authors used game-theoretic approach. The authors design a Stackelberg leader-follower game where the supplier acts as Stackelberg leader and buyers follow the supplier's pricing decision to maximize their profit level. Additionally, both buyers decide either to cooperate or non-cooperate while investing in supplier development.FindingsThe results show that the cooperative investment is always an optimal strategy for buyers and supplier. Interestingly, the efficient buyer's share of investment level is lower under non-cooperative investment structure and he is better-off due to its capability of taking advantage from the other buyer's investment. However, the inefficient buyer, on the other hand, is worse-off under non-cooperative investment. Furthermore, comparative analysis between the two shows that initially, the buyer who extracts more profit because of the other buyers' development investment tends to prefer the non-cooperative development investment set up. However, after a certain point, the same buyer is better-off under cooperative development investment through cooperation, and sharing equal benefit of the supplier's development, as the supplier in turn, starts charging a higher wholesale price under non-cooperative investment case.Originality/valueTo the best of authors’ knowledge, extant literature on supplier development has mostly focused on. One supplier-one buyer; thus, the learning spillover effect has almost been unexplored. In real-life, different buyers often purchase from the shared supplier. Therefore, it is important to analyze the spillover of supplier development benefits due to investment of one buyer on other buyer and deriving the condition under which buyers would be incentivized to invest jointly or individually.

To Trade, or not to Trade, that is the Question: New Roles for Incomplete Contracts in Dynamic Settings

We reexamine the role of incomplete contracts in a dynamic model of renegotiation that endogenizes the timing of investments and trade. The interaction between bargaining and investment significantly alters the lessons learned from static models. When the opportunity to trade is expected to be long lasting, contracts that exacerbate the parties’ absolute vulnerability to hold-up—especially following under-investment—are desirable. For example, joint ownership of complementary assets can be optimal, an exclusivity agreement can protect the investments of its recipient, and trade contracts can facilitate purely cooperative investment.

Co-operative Investment Policy as a Tool to Accelerate the Entrepreneurship and Improve the Poverty Condition in Bangladesh

Bangladesh is one of the poorest countries in the world with low GDP/capita and minimum purchasing power. A third of the total population (24.3%) lives below the national poverty line ($2/day) while a half of them do live in extreme poverty level ($1.25). It’s now a national issue as high rate of poverty is the cause of permanent economic downturn and socio-economic depression in Bangladesh. Many policies have been applied by government and NGOs since its independent in 1971 to alleviate the poverty but no policy has brought a remarkable outcome. The main purpose of the study is to examine the causes for high rate of poverty in Bangladesh and insufficiency of the government agencies that are working to alleviate the poverty and propose innovative approaches to growth of entrepreneurship to bring sustainable economic growth and improve the poverty condition. The study is based on structural and semi-structural questionnaires and face to face interview. A total of 60 structural and same numbers of semi-structural questionnaires were given to 100 recipients of various age, sex, education, profession and economic levels regarding the factors to get feedback. In this research, a cooperative investment policy and a government action plan have been drawn up based on coordination between the various agencies, which allow the impoverished section of the population to save and invest collectively in order to involve them in entrepreneurship to lift themselves out of the poverty cycle and bring sustainable development. The aim of the research involving the impoverished population to entrepreneurship through co-operative investment policy and promoted government mechanisms to improve the poverty condition in Bangladesh. Search tasks: *To examine the major reasons for the high rate of poverty in Bangladesh. *To explore the impacts of entrepreneurship to accelerate the economic growth and improve the poverty condition in Bangladesh. *To discover the most effective ways to involve the impoverished population to entrepreneurship. *To develop a co-operative investment policy and an integrated government strategy covering all financial, administrative, supervisory and regulatory aspects that will regulate the state's action to accelerate the entrepreneurship and achieve economic growth. Subject of the research cooperative investment policy and improved government mechanism for poverty reduction in Bangladesh through entrepreneurship growth. Object of the research the rate of poverty, entrepreneurship. Keywords: Impoverished Population, Co-operative Investment Policy, Entrepreneurship, Government Performance, Sustainable Development.

Does Poverty Undermine Cooperation in Multiethnic Settings? Evidence from a Cooperative Investment Experiment

What undermines cooperation in ethnically diverse communities? Scholars have focused on factors that explain the lack of inter-ethnic cooperation, such as prejudice or the difficulty to communicate and sanction across group boundaries. We direct attention to the fact that diverse communities are also often poor and ask whether poverty, rather than diversity, reduces cooperation. We developed a strategic cooperation game where we vary the income and racial identity of the interaction partner. We find that beliefs about how poor people behave have clear detrimental effects on cooperation: cooperation is lower when people are paired with low-income partners, and the effect is particularly strong when low-income people interact among themselves. We observe additional discrimination along racial lines when the interaction partner is poor. These findings imply that poverty and rising inequality may be a serious threat to social cohesion, especially under conditions of high socioeconomic segregation.

Joint optimal decision of the shared distribution system through revenue-sharing and cooperative investment contracts

Purpose The rapid development of e-commerce has caused not only explosive growth of the express delivery industry, but also ever-greater operational pressures. Models from the sharing economy may provide new ideas for operational improvement. The purpose of this paper is to consider an optimization method that reduces costs and increases efficiency. The proposed method enables a shared distribution system based on revenue-sharing and cooperative investment contracts. Design/methodology/approach The authors design a two-echelon supply chain (SC) of the shared distribution system with one shared distribution company and N express companies. In this SC, the express companies provide only inter-city transportation, and they outsource internal-city transportation to a shared distribution company. This distribution system differs from that of the traditional express delivery industry. The traditional system of delivery requires large numbers of empty trips (with no load to deliver), because the operating mode of urban distribution has been the franchise. To offer greater efficiency and performance, the authors introduce the sharing economy mode of express delivery. The authors examine the potential of a joint optimal decision-making strategy that involves revenue-sharing and cooperative investment contracts based on an order flow proportion (OFP) and a revenue-sharing factor (RSF). In this shared distribution system, the most important innovation is that all of the express companies jointly invest in and establish a shared distribution company based on OFP or RSF principles. Findings The profitability of an SC with revenue-sharing contracts based on an OFP system is much higher than that of a decentralized SC, and it is very close to the profitability of a centralized SC. In SCs with revenue-sharing contracts that are based on RSFs, there are many possible combinations of RSFs that can increase the overall profitability. The analyses indicate that the OFP system offers the best solution in designing revenue-sharing contracts based on RSFs. Practical implications This study indicates that revenue-sharing contracts based on both OFP and RSF principles can increase overall SC returns by 0.21 to 0.44 percent. In sum total, this improvement could mean a 0.84 to 1.76bn Yuan increase in revenues for the 400+ bn-Yuan express delivery industry. Originality/value The authors find that a combination of equity investment and SC coordination contracts makes the cooperation between SC members much more stable. Through this kind of shared distribution system, the scale of economy can further reduce the costs and increase the efficiency of the express delivery industry.

How Cooperative Is ‘Cooperative Investment'?

The literature identifies the importance of cooperation in enhancing supply chain performance, but only a few papers have studied the role of cooperative investment in supply chain contracting. This article contributes to the literature of supply chain contracts by highlighting the importance of a cooperative investment in improving quality in presence of uncertainty. When the delivery of a high-quality product is uncertain and costly, the supplier may choose to deliver a less costly standard product, delivery of which is not uncertain, and hence the buyer needs to incentivize the supplier to take the risk. Using a principal-agent set-up, this article shows that incentivizing the supplier to choose the risky action of attempting delivery of the high-quality product is easier for the buyer in presence of shared cooperative investment that reduces epistemic quality uncertainty. However, the supplier passes the entire burden of investment on the buyer. The optimal investment for the buyer depends on parameters that determine effectiveness of the investment in reducing quality uncertainty.