Title: Strategic inventories in a supply chain with downstream Cournot duopoly

Authors: Xiaowei Hu; Jaejin Jang; Nabeel Hamoud; Amirsaman Bajgiran

Addresses: University of Wisconsin-Milwaukee, 3200 N Cramer St., Milwaukee, WI 53211, USA ' University of Wisconsin-Milwaukee, 3200 N Cramer St., Milwaukee, WI 53211, USA ' University of Wisconsin-Milwaukee, 3200 N Cramer St., Milwaukee, WI 53211, USA ' University of Wisconsin-Milwaukee, 3200 N Cramer St., Milwaukee, WI 53211, USA

Abstract: The inventories carried in a supply chain as a strategic tool to influence the competing firms are considered to be strategic inventories (SI). We present a two-period game-theoretic supply chain model, in which a singular manufacturer supplies products to a pair of identical Cournot duopolistic retailers. We show that the SI carried by the retailers under dynamic contract is Pareto-dominating for the manufacturer, retailers, consumers, the channel, and the society as well. We also find that retailers' SI, however, can be eliminated when the manufacturer commits to wholesale contract or inventory holding cost is too high. In comparing the cases with and without downstream competition, we also show that the downstream Cournot duopoly undermines the profits for the retailers, but benefits all others.

Keywords: supply chain coordination; game-theoretic modelling; strategic inventories; contracts; Cournot duopoly.

DOI: 10.1504/IJOR.2021.119934

International Journal of Operational Research, 2021 Vol.42 No.4, pp.524 - 542

Received: 09 Jan 2019
Accepted: 02 Jun 2019
Published online: 04 Jan 2022 *

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