Game-theoretic analyses of decentralized assembly supply chains: Non-cooperative equilibria vs. coordination with cost-sharing contracts

This paper considers a multiple-supplier, single manufacturer assembly supply chain where the suppliers produce components of a short life-cycle product which is assembled by the manufacturer. In this single-period problem the suppliers determine their production quantities and the manufacturer chooses the retail price. We assume that the manufacturer faces a random pricedependent demand in either additive or multiplicative form. For each case, we analyze both simultaneous-move and leader-follower games to respectively determine the Nash and Stackelberg equilibria, and …nd the globally optimal solution that maximizes the system-wide expected pro…t. Then, we introduce appropriate buy-back and lost sales cost-sharing contracts to coordinate this assembly supply chain, so that when all the suppliers and the manufacturer adopt their equilibrium solutions, the system-wide expected pro…t is maximized.