Supplier-buyer models for the bargaining process over a long-term replenishment contract

This paper presents supplier-buyer models to describe the bargaining process between a supplier and a buyer over a long-term replenishment contract in a supply chain system. We develop two different models, one for the situation where the supplier has a superior bargaining power over the buyer and the other for the reverse situation. Analysis based on a game theoretic approach is done to derive the methods for finding the optimal strategies for each agent. We verify that the solutions derived are Nash Equilibriums. The system costs resulting from the strategies are compared with each other to find out the economic implications of the strategies.