Supply Chain Competition: A Market Game Approach
Department of Industrial Engineering, Bilkent University
We study supply chains where multiple suppliers sell to multiple retailers through a wholesale market. In practice, we often observe that both suppliers and retailers tend to influence the wholesale market price retailers pay to suppliers. However, existing models of supply chain competition do not capture retailers' influence on the wholesale price (i.e., buyer power), and show that the wholesale price and the order quantity per retailer do not change with the number of retailers. To overcome this limitation, we develop a competition model based on the market-game mechanism in which the wholesale price is determined based on both suppliers' and retailers' decisions. When taking into account retailers' buyer power, we obtain the result that is consistent with the observed practice: as the number of retailers increases, each retailer's buyer power decreases, and each retailer is willing to pay more for her order, so the wholesale price increases. In this case, supply chain expansion to include more retailers (or suppliers) turns out to be more beneficial in terms of supply chain efficiency than what the prior literature shows without considering buyer power. Finally, we analyze the integration of two local supply chains, and show that, although the profit of the integrated supply chain is greater than the sum of total profits of local supply chains, integration may reduce the total profit of firms in a retailer-oriented supply chain that has more retailers than suppliers.
Dr Gizem Korpeoglu is an assistant professor of Industrial Engineering at Bilkent University. Before joining Bilkent, she was a postdoctoral fellow of Operations and Technology at University College London, School of Management. She received her PhD in Economics from Tepper School of Business at Carnegie Mellon University, and also holds an MS degree from there. She received her BS degree from Middle East Technical University.
Dr Korpeoglu studies operational problems in traditional and innovative marketplaces using game theoretical models. During her PhD studies, she has worked on competition models and mechanism design. After her PhD, she has applied her methodological knowledge on markets and competition models to supply chains, crowdsourcing platforms, and other online marketplaces. Her work has appeared at leading operations journals such as Management Science and Manufacturing and Service Operations Management, and economics journals such as Journal of Mathematical Economics and Economic Theory. She is a member of the Institute for Operations Research and Management Science (INFORMS) and Production and Operations Management Society (POMS), and the recipient of the second prize at INFORMS Technology Innovation Management and Entrepreneurship Section (TIMES) best working paper competition in 2018.VenueFriday, November 8, 2019 at 4.00 pm in IE 03