Influence of market share and information asymmetry on supply contracts for a single supplier multiple buyer network

Influence of market share of buyers on choice of contracts has not received sufficient attention in the context of various supply chain structure. This paper focuses on this gap and examines a network consisting of one supplier and two buyers under complete and partial decentralization. In the complete decentralized setting both buyers are independent of the supplier. In the partial decentralized setting the supplier and one of the buyers form a vertically integrated entity. Both buyers order from the single supplier and produce similar products to sell in the same market. The supplier charges the buyer based on a contract and the transfer price varies depending on the supply chain structure. We investigate the influence of supply chain structure, market-share and asymmetry of information on supplier’s choice of contracts. We discuss two contract types namely quantity-discount and nonlinear two-part tariff contracts; we also examine wholesale price and linear two-part contract as special cases. We determine the cutoff policies by incorporating the reservation profit level of individual buyers. The managerial implications of the analyses are presented in the conclusion.