Title: The impacts of logistics service integrator's overconfidence behaviour on supply chain decision under demand surge

Authors: Weihua Liu; Di Wang; Ou Tang; Donglei Zhu

Addresses: College of Management and Economics, Tianjin University, Tianjin, 300072, China ' College of Management and Economics, Tianjin University, Tianjin, 300072, China ' Department of Management and Engineering, Linköping University, Linköping, SE-581 83, Sweden ' College of Management and Economics, Tianjin University, Tianjin, 300072, China

Abstract: This paper studies a two-echelon logistics service supply chain (LSSC) composed of one logistics service integrator (LSI) and one functional logistics service provider (FLSP). We develop a two-period service capacity procurement model where market demand surges in the second period. The LSI, as the Stackelberg game leader, tends to be overconfident when market demand surges. The results show that when the demand surges in the second period, if the overconfident purchasing capacity of LSI cannot meet the market demand, the overconfidence behaviour will negatively affect LSI's optimal pricing. Besides, the overconfidence behaviour leads to the lowest service level of the FLSP in the second period under demand surge. However, such negative impacts can be reduced or even eliminated in certain conditions through the FLSP-led mechanism and the dynamic wholesale price mechanism. The numerical simulation and the case study from China are used to illustrate the model and draw some conclusions. [Received 17 August 2017; Revised 19 February 2018; Accepted 30 March 2018]

Keywords: logistics service capacity procurement; overconfidence; demand surge; pricing decision; service level decision.

DOI: 10.1504/EJIE.2018.093634

European Journal of Industrial Engineering, 2018 Vol.12 No.4, pp.558 - 597

Available online: 11 Jul 2018 *

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